US companies scale back sharply on hiring

US companies scaled back hiring sharply last month, adding to evidence that the economy has lost momentum since the start of the year and triggering a decline in the dollar.

Payrolls increased by 126,000 in March, well below Wall Street's 245,000 consensus forecast and snapping a 12-month spell of gains above 200,000, the Bureau of Labor Statistics said.

The previous two months' readings were also revised down by a net 69,000 jobs, while the unemployment rate was unchanged at 5.5 per cent, according to the report. Job gains were seen in professional and business services, healthcare, and the retail sector, while the mining industry lost posts amid the oil price fall.

The figures are likely to contribute to a mood of caution at the Federal Reserve, where the majority of policymakers are still expecting to lift interest rates this year.

Janet Yellen, the central bank's chairwoman, said in a speech in San Francisco last week that any moves would happen at a gradual pace, reflecting in part "the gradual diminution of headwinds from the financial crisis".

The evolution of the jobs market is key to the Fed's deliberations over the timing of the first hike. Until this month it had shown robust improvement, with the private sector adding 12.1m jobs over 61 straight months - the longest run of gains on record.

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"These are disappointing, but even in strong years you get weak numbers," he said.

The data pushed the dollar down to the $1.10 mark against the euro, while the yield on the 10-year note fell 8 basis points to 1.84 per cent. Interest rate futures imply that the likelihood of the Federal Reserve holding fire at its June meeting has climbed from a week ago.

Employment growth has averaged a healthy 269,000 per month over the past year, but in recent months several economic indicators have suggested that the economy has lost some of its vigour, among them disappointing retail sales and weak trade data.

James Knightley, economist at ING, said the figures were a "bad miss", while adding that the slowdown was likely to be due in part to transitory factors such as bad weather and a West Coast port disruption.

"With these factors having dissipated we expect the 'hard' data to bounce back in the next few months and the payrolls figures to also recover," he said.

In a more encouraging sign, hourly earnings rose on the month, although the annual rate of gains remains locked in its recent trend, rising 2.1 per cent compared with a year earlier.

None of the 98 economists polled by Bloomberg had forecast such a low hiring figure, and adding to the pressure against the dollar, the previous month's job creation was revised down from 295,000 to a more muted 264,000.

The weakest sector for hiring in the month was mining, where the oil slump triggered a net 11,000 job reductions. Manufacturing and construction also lost jobs, while gains in the leisure and hospitality sector slowed sharply to 13,000 from 70,000 the previous month.

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