* Nonfarm payrolls rise 175,000 in February
* Unemployment rate rises to 6.7 percent from 6.6 percent
* Average hourly earnings rise nine cents, workweek falls
* Data seen bolstering Fed's resolve to scale back stimulus
By Lucia Mutikani
WASHINGTON, March 7 U.S. job growth accelerated
sharply in February despite the icy weather that gripped much of
the nation, easing fears of an abrupt economic slowdown and
keeping the Federal Reserve on track to continue reducing its
Employers added 175,000 jobs to their payrolls last month
after creating 129,000 new positions in January, the Labor
Department said on Friday. The unemployment rate, however, rose
to 6.7 percent from a five-year low of 6.6 percent as Americans
flooded into the labor market to search for work.
"It reinforces the case for the economy being stronger than
it's looked for the last couple of months," said Bill Cheney,
chief economist at John Hancock Financial Services in Boston.
"It makes life easier for the Fed and feeds into continuing the
The report also showed the largest increase in average
hourly earnings in eight months and the payrolls count for
December and January was revised up to show 25,000 more jobs
created during those months than previously reported.
Investors on Wall Street cheered the report. U.S. stocks
ended mostly higher, with the Standard & Poor's 500 index
closing at a record. The dollar bounced off a four-month low,
while prices for U.S. Treasury debt fell, with the yield on the
benchmark 10-year note hitting a six-week high.
Interest rate futures showed that traders ramped up bets on
the Fed raising rates a bit sooner than had been previously
thought. They now point to a 54 percent probability of a rate
hike in June 2015.
Unusually cold and snowy weather has disrupted activity in
much of the United States for months, and a few economists had
begun to speculate that the U.S. central bank could reconsider
its plan to wind down its bond-buying stimulus.
The eastern and central United States experienced record low
temperatures last month, and ice and snow blanketed densely
populated areas during the week employers were surveyed for
February payrolls. The winter storms left Wall Street bracing
for a much weaker report. Economists had forecast nonfarm
payrolls rising by only 149,000 jobs.
The weather, however, did have an impact. It cut into the
length of the average workweek, which hit its lowest level since
January 2011 and led to a drop in a measure of total work
effort. But economists expect a reversal as soon as this month.
"The economy will defrost in the spring and heat up in the
summer," said Michelle Meyer, a senior economist at Bank of
America Merrill Lynch in New York. "We should see solid gains in
job growth in coming months."
The smaller survey of households from which the unemployment
rate is derived showed 6.9 million people with jobs reported
they were working part-time because of the weather. That was the
highest reading for February since the series started in 1978.
It also showed 601,000 people could not get to work because
of the weather, the highest level for February since 2010.
Economists said job growth in February would have been as high
as 200,000 if not for the weather.
Payrolls averaged about 205,000 new jobs per month in the
first 11 months of 2013, but that figure dropped to just 129,000
for December, January and February.
GROWTH SLOWDOWN TEMPORARY
Fed officials, from Chair Janet Yellen on down, view the
recent economic weakness as largely weather-related and
temporary. The policymakers have suggested it does not meet the
high bar they have set in terms of what it would take for them
to stop scaling back their bond-buying stimulus.
The Fed has already reduced its monthly bond purchases by
$10 billion at each of its last two meetings, and a similar
reduction is expected when officials next meet on March 18-19.
But the weather is not the only factor behind the lull in
activity. Businesses are working through a huge pile of unsold
goods accumulated in the second half of 2013, which means they
have no incentive to place new orders with manufacturers.
In addition, the expiration of long-term unemployment
benefits for more than one million Americans in December and
cuts to food stamps are also hurting spending.
As a result of these temporary factors, growth in the first
quarter is expected to slow to an annual rate below 2 percent.
The economy grew at a 2.4 percent rate in the final quarter of
Economists welcomed the rise in the unemployment rate as a
sign of labor market strength, since it was driven by Americans
taking up the hunt for work.
"Evidently, the potential employees think the economy is
improving and there are more jobs to be had," said Sung Won
Sohn, an economics professor at California State University
Channel Islands in Camarillo, Calif.
A measure of underemployment that includes people who want a
job but who have given up searching and those working part-time
because they cannot find full-time jobs dropped to 12.6 percent,
its lowest level since November 2008.
Despite the improvement, the labor market is still far from
a full recovery. The percentage of working-age Americans with a
job, a broad gauge of labor market health, was steady at 58.8
percent last month. It has not risen much since the recession
ended nearly five years ago.
In addition, the number of Americans who have been out of
work for more than six months rose in January.
Job gains last month were fairly broad-based, with private
sector payrolls rising 162,000 and government adding 13,000
jobs. Manufacturing payrolls rose by 6,000 jobs, the seventh
straight monthly increase.
Construction payrolls, which surprised in January by logging
hefty gains, increased by 15,000 last month.
Insurance employment recorded its largest gain since July,
possibly boosted by implementation of President Barack Obama's
signature healthcare law. Healthcare payrolls also advanced.
There were, however, declines in retail, information and
transportation and warehousing employment.
Average hourly earnings rose nine cents.
"This gain, along with a rise in jobs, supports our case for
better real incomes in 2014 and, thereby, a better outlook for
consumer spending," said John Silvia, chief economist at Wells
Fargo Securities in Charlotte, North Carolina.