Weather restrains U.S. private hiring, services sector growth
WASHINGTON (Reuters) - U.S. private employers added fewer workers than expected in February and services sector growth hit a four-year low, the latest signs of the economic toll severe weather is taking.
Economists were little fazed by Wednesday's downbeat reports. They said the economy's fundamentals were still sound, and that a string of mostly weak data would not be enough to dissuade the Federal Reserve from continuing to dial back its monetary stimulus.
"We continue to believe that the underlying momentum in the economy remains favorable, and we look for the pace of growth to rebound meaningfully in the coming months as the drag on activity from the unseasonably cold weather abates," said Millan Mulraine, deputy chief economist at TD Securities in New York.
A report from payrolls processor ADP showed private employment increased by a tepid 139,000 jobs last month. At the same time, private-sector jobs growth in January was revised down sharply to 127,000 from 175,000.
Moody's Analytics, joint developers of the report, blamed harsh weather for last month's reading, which was below the 160,000 jobs that economists had expected.
The report came ahead of the government's comprehensive employment report on Friday. It raised the prospect of a third straight month of sub-par nonfarm payrolls gains in February, though economists said the ADP data was not a good predictor.
A Reuters survey conducted last week forecast employers added 150,000 workers to their payrolls last month, up from the similarly weather-depressed gains of 113,000 in January and 75,000 in December.
In a separate report, the Institute for Supply Management said its services sector index fell to 51.6 last month, the weakest reading since February 2010, from 54 in January. It blamed bad weather for the moderation in activity.
Still, February marked the 50th month in a row the index was above 50, the level that separates expansion and contraction.
A sub-index of services sector employment contracted for the first time since December 2011 and recorded its worst reading in nearly four years.
A separate report on the services sector from financial data firm Markit also suggested activity slowed. In addition, Markit's gauge of services sector employment fell to an 11-month low.
FED SEEN STAYING THE COURSE
U.S. stocks were little changed after two days of sharp swings related to events in Ukraine. The dollar slipped against a basket of currencies, while prices for U.S. Treasury debt rose marginally.
The weather has complicated the Fed's task of determining the economy's likely path. Still, Fed officials from Chair Janet Yellen on down have shown little inclination to halt their plan to wind down the central bank's monthly bond purchases this year.
Yellen told lawmakers last month that it would take a "significant change" to the economy's prospects for the Fed to alter its plans.
This winter has been colder than usual, with severe snowstorms affecting large parts of the Northeast, Midwest and Upper Midwest of the country, while the Southeast has experienced unusual ice storms in recent weeks as well.
"The Fed has already signaled that it will not jump to conclusions about the pace of growth based on recent data," said John Ryding, chief economist at RDQ Economics in New York.
"Unless Friday's jobs number is very weak, we expect the Fed will announce a further reduction in the pace of purchases later in the month."
The Fed's policy-setting committee meets on March 18-19.
While much of the slowdown in activity has been blamed on the cold weather, businesses are also placing fewer orders with manufacturers as they work through stocks of unsold goods.
The end of long-term jobless benefits and cuts to food stamps have also crimped growth.
The economy grew at a 2.4 percent annual rate in the fourth quarter, sharply decelerating from the 4.1 percent pace of the July-September quarter when business inventories bulged.