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US Feb job growth offers upbeat sign for weather-beaten economy Trade gap widens

WASHINGTON, March 7, (RTRS): US 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 monetary stimulus. 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 tapering process.”

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 and the Standard & Poor’s 500 index reached a fresh intraday record high before falling back to trade little changed.

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The dollar lifted off a four-month low against a basket of currencies, while the yield on the benchmark 10-year US Treasury note jumped to a six-week high, putting it on course for its biggest weekly rise in three months. Interest rate futures showed that traders ramped up bets on the Fed hiking rates a bit sooner than had been previously thought. They now point to a 53 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 US central bank could reconsider its plan to wind down its bond-buying stimulus.
 
With snow and ice covering densely populated areas during the week employers were surveyed for February payrolls, Wall Street had braced 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. Fed officials, from Chair Janet Yellen on down, view the recent economic weakness as largely weather-related and temporary, and 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.
 
Meanwhile, the US international trade deficit ticked slightly higher in January but stayed on a narrowing trend as the global economy continues to slowly recover, official data released Friday showed.  The nation’s trade shortfall in goods and services rose to $39.1 billion in January from $39.0 billion in December as imports increased more than exports, the Commerce Department said. The December trade gap was upwardly revised from the initial estimate of $38.7 billion. The larger trade gap was unexpected. Analysts on average forecast it would shrink to $37.3 billion. But compared with a year ago, the US trade deficit fell by $3.0 billion from January 2013, continuing the narrowing trend of 2013.
 
In January, the United States imported $231.6 billion in goods and services, an increase of $1.3 billion from December. Exports rose a more modest $1.2 billion to $192.5 billion. “The January trade data point to a gradual global economic recovery, both in the US and abroad, as exports and imports both increased,” said Tu Packard of Moody’s Analytics. The petroleum deficit jumped to $19.3 billion from $15.5 billion in December. The average price of imported crude oil per barrel fell to $90.21, the lowest level since February 2011. In goods trade data that is not seasonally adjusted, the chronic gap with China widened sharply, to $27.8 billion in January from $24.5 billion in December.
 
US exports to the world’s second-largest economy fell by $2.7 billion to $10.4 billion. The gap with Canada, the nation’s largest trade partner, jumped to $4.1 billion from $3.4 billion. The $2.8 billion gap with Mexico was the lowest since January 2009. The trade balance with the European Union suggested stronger demand in the recovering bloc. The goods deficit with the EU fell to $8.8 billion in January from $11.3 billion in December. With the 18-member eurozone, the shortfall narrowed 19 percent to $7.2 billion. Jim O’Sullivan, chief US economist at High Frequency Economics said the January trade data could lower economic growth estimates for the first quarter of 2014. “Both real exports and imports began Q1 below their Q4 average,” he said.

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