Harsh Weather Is Blamed for Hiring Woes
Business + Economy

Harsh Weather Is Blamed for Hiring Woes

REUTERS/Max Whittaker

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.

Another indication of the weather's impact came in the Federal Reserve's anecdotal Beige Book on Wednesday. The U.S. central bank described the economy's expansion in recent weeks as "modest to moderate," with bad weather causing a "slight" decline in activity in two of 12 districts.

Related:  Extreme Weather Could Chill the Economy 

Economists were little fazed by the downbeat reports. They said the economy's fundamentals were still sound, and that a string of mostly weak data would not dissuade the Fed 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 and 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.

Related:  Polar Vortex Could Freeze $5B Out of the Economy 

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, officials from Fed Chair Janet Yellen on down have shown little inclination to halt their plan to dial back the central bank's monthly bond purchases. Yellen told lawmakers last month that it would take a "significant change" to the economy's prospects.

The Beige Book, which is based on reports from the Fed's business contacts around the nation, mentioned the word "weather" 119 times, while "snow" or a derivative of snow was used 24 times. The word "ice" appeared twice.

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.

With additional reporting by Rodrigo CamposRyan Vlastelica and David Gaffen in New York, all of Reuters.