Job growth weakest in 2 years but ...
Employers added fewer jobs in February, but estimate for January revised higher; unemployment rate drops to 4.5 percent.
NEW YORK (CNNMoney.com) -- Payroll growth was the weakest in two years in February but a lower unemployment rate and a revision higher for January job growth hinted at surprising resilience in the nation's labor market.
The economy created 97,000 jobs last month, the Labor Department said, down from a revised 146,000 gain in January, which was 35,000 more than the government's original estimate a month ago.
The gain of 97,000 was the smallest since January 2005, weaker than even the final readings in the two months after Hurricane Katrina that fall. But it was roughly in line with the forecasts of economists surveyed by Briefing.com, who had been looking for a gain of 100,000 jobs.
The unemployment rate fell to 4.5 percent from 4.6 percent in January. The consensus among economists was that the unemployment rate would stay at 4.6 percent, although about a fifth of those surveyed by Reuters had been looking for a rise to 4.7 percent. Few had forecast a decline.
Average hourly wage climbed 6 cents, or 0.4 percent, to $17.16. That was bigger than the 0.3 percent rise forecast by economists.
Wages are now up 4.1 percent from a year earlier, and kept worker pay ahead of price increases. There was a 2.1 percent increase in prices over the 12 months ending in January, according to the Consumer Price Index, the government's key inflation measure.
John Silvia, chief economist for Wachovia, said that while the report was stronger than many economists had feared, it confirmed the slowdown in hiring seen in recent months. And sluggish job growth is likely to continue, he said, noting more job losses are likely in construction and manufacturing, which saw a drop of 86,000 jobs last month.
"We're still thinking a number around an average gain of 110,000 to 130,000 a month is reasonable for the rest of the year, but it's all going to be in the service sector," he said. "The construction business will be negative 10,000 to negative 20,000 a month for the next six months. It's going to be part and parcel of the adjustment process in the real estate market."
Meanwhile, the wage gains seen recently are a concern for the Federal Reserve, Silvia added.
"What they're stuck with is wage numbers that are stubbornly higher, even with a slowdown in hiring," he said. "You have just enough job growth to generate wage pressures. If you had seen a real weak number, some broad-based weakness, I think the door would have been open to a Fed cut. But I think they stay on hold."
The Fed has held its key interest rate steady since last summer, and some investors have been hoping the central bank will start cutting short-term rates this year. But some analysts are now saying the Fed could be on hold for most of 2007.
Silvia, who who had been looking for the unemployment rate to stay unchanged, said the decline was probably a statistical anomaly, caused by a jump in the number of people counted as not in the labor force.