U.S. unemployment rate hits 4-year low

Biggest gains in construction sector

WASHINGTON (Reuters) — United States employers stepped up hiring in February, pushing the unemployment rate to a four year-low, suggesting the economy is gaining traction despite the blow from higher taxes and deep government spending cuts.

Non-farm payrolls surged 236,000 jobs last month, the U.S. Labor Department said, handily beating economists' expectations for a gain of 160,000.

The jobless rate fell to 7.7 per cent, the lowest since December 2008, from 7.9 per cent in January. The decline reflected gains in employment as well as people leaving the labour force.

"This was a strong number and one of those rare cases where we were firing on all cylinders," said Jacob Oubina, a senior U.S. economist at RBC Capital Markets in New York.

Although December and January's employment data was revised to show 15,000 fewer jobs added than previously reported, details of the report were solid, with construction adding the most jobs since March 2007 and increased hours for all workers.

Job gains in February were well above the 195,000 monthly average for the three months to January.

The solid report offered hope the economy would be able to absorb the fiscal austerity.

A two per cent payroll tax cut ended and tax rates went up for wealthy Americans on Jan. 1. In addition, $85 billion in federal budget cuts that could slice as much as 0.6 percentage point from growth this year started on March 1.

But the pace of gains is still below the roughly 250,000 jobs per month over a sustained period that economists say is needed to significantly reduce unemployment. The Federal Reserve will likely maintain its very accommodative monetary policy.

February's employment report showed broad-based gains, with construction the star. The sector added 48,000 jobs and in January construction payrolls increased 25,000.

A decisive turnaround in the housing market and rebuilding on the East Coast after the destruction by Superstorm Sandy in late October is boosting jobs at construction sites.

Manufacturers stepped up hiring in February, although the pace was still well below early last year because of lackluster domestic demand and cooling growth overseas. Factory jobs increased 14,000 last month after rising 12,000 in January.

Retail employment increased 23,700 jobs, rising for an eighth straight month, and defying a recent slowdown in sales.

Health care and social assistance saw another month of solid job gains. The same was the case for leisure and hospitality.

Government continued to shed jobs, with payrolls dropping 10,000 last month after falling 21,000 in January.

The sustained steady job gains are lending some stability to wages. Average hourly earnings rose four cents last month. That was the fourth straight month of gains in hourly earnings.

They increased 2.1 per cent in the 12 months through February after a similar advance in January.

The length of the average workweek increased to 34.5 hours from 34.4 hours in January.

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