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Non-Farm Payrolls See Lowest Rise since December 2013

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Non-farm payrolls rise

US non-farm payrolls increased by just 126,000 jobs in March 2015—the lowest since December 2013. They increased from a downwardly revised 264,000 in February—compared to 295,000 reported earlier. The number of long-term unemployed, who have been without jobs for over 27 weeks, stood at 2.6 million in March. It didn’t change much from a month ago. These people account for 29.8% of the total unemployed population.

While professional and business services, healthcare, and retail trade added jobs in March, mining cut 11,000 jobs. Construction, manufacturing, and food services and drinking places, among others, showed little change month-over-month.

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Unemployment rate

A survey of households showed that the unemployment rate was 5.5% in March. It didn’t changed from a month ago.

Both the employment-population ratio and the labor force participation rate didn’t change much in March. The employment-population ratio stood at 59.3%. It didn’t change for the third successive month. The labor force participation rate edged down to 62.7% in March from 62.8% a month ago.

Among major worker groups, the seasonally adjusted unemployment rate for adult men edged down to 5.1% in March from 5.2% a month ago. For adult women, it stood at 4.9%. It was the same as in February.

Average hourly earnings

The positive from the March jobs report was a rise in average hourly earnings. Average hourly earnings rose $0.07 month-over-month in March to $24.86. This was following a $0.03 rise in February. Although hourly earnings are up 2.1% from a year ago, they’re still slower than the historical trend. Construction saw the quickest growth in hourly wages. It grew 1.1% to $27.23 per hour. Retail trade saw a 0.2% fall in hourly wages to $17.28.

Recently, Walmart (WMT) and Target (TGT) announced pay hikes. McDonald’s (MCD) will increase its pay this summer.

Investor impact

The non-farm payrolls report affects industrials-related ETFs like the SPDR Industrial Select Sector Fund (XLI) and the First Trust Industrials AlphaDEX Fund (FXR). Materials-related ETFs like the SPDR Materials Select Sector Fund (XLB) and the iShares US Home Construction (ITB) also watch out for the report. These two growth sectors are affected if the jobs report is a surprise—positive or negative. XLB has DuPont (DD), Monsanto (MON), and Dow Chemical (DOW) as its top three holdings. They account for ~30% of the portfolio.

An increase in hiring signals a general improvement in the economic situation. As a result, this report also impacts broad-based ETFs like the SPDR S&P 500 ETF (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the iShares Core S&P 500 (IVV).

In the next part of this series, we’ll look at another jobs report that impacts markets—the ADP employment report.

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