U.S job growth sharply dropped in March as employers as the economy added 126,000 jobs seasonally adjusted in March, from 264,000 in February.

This is the smallest job gain since December 2013, and a number that was revised down from 295,000 the Labor Department said on Friday. This is however, likely to further delay the anticipated gradual interest rate hike by the Federal Reserve.

A slowdown in the Manufacturing sector impacted by a strong dollar and lower crude oil prices and harsh winter weather could have dragged on hiring as leisure and hospitality sectors recorded a sharp slowdown in jobs growth.

While the jobless rate steadied at a more than 6-1/2-year low of 5.5 percent, the workforce shrank. The labor force participation rate returned to a more than 36-year low reached late 2014.

Millan Mulraine, deputy chief economist at TD Securities in New York said, "The report confirms the emerging narrative of slowing growth momentum seen in the other economic indicators. It will weaken the argument for a mid-year (rate) hike."

The dollar has gained about 13 percent against the currencies of the main U.S. trading partners since last June. Economists say the impact is equivalent to a half-point interest rate hike.

At the same time, the sharp oil price drop has curtailed U.S. drilling activity. Construction employment fell 1,000 last month as payrolls in the mining sector declined 11,000, indicating ongoing slowdown in oil and gas extraction. Energy producers have shut down most of their rigs since October.

The harsh winter weather and a now-settled labor dispute at the usually very busy West Coast ports have also weighed on activity, as well as weaker global demand. Bad weather is estimated to have lopped off as much as seven-tenths of a percentage point from first-quarter growth.

Somehow, there was some positive news in the report. Average hourly earnings increased 0.3 percent. Even so, that only lifted the year-on-year gain to 2.1 percent, in the same tepid range that earnings growth has held to for several years.

With Wal-Mart and McDonald's recently announcing pay increases for their hourly workers, wage growth could gain traction in the months ahead. Other companies, including TJX Cos Inc and health insurer Aetna, also have announced pay hikes.

Although the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, slipped one-tenth of a percentage point to 62.7 percent in March, other measures on the Fed's so-called dashboard continued to improve.

 

 
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