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U.S. February job growth weakest in nearly one and a half years

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WASHINGTON (Reuters) – U.S. employment growth almost stalled in February, with the economy creating only 20,000 jobs, adding to signs of a sharp slowdown in economic activity in the first quarter.

FILE PHOTO: Job seekers speak with potential employers at a City of Boston Neighborhood Career Fair on May Day in Boston, Massachusetts, U.S., May 1, 2017. REUTERS/Brian Snyder

The meager payroll gains reported by the Labor Department on Friday were the weakest since September 2017, with a big drop in the weather-sensitive construction industry.

They also reflected a decline in hiring by retailers and utility companies as well as the transportation and warehousing sector, which is experiencing a shortage of drivers.

The sharp step-down in payrolls was another blow to President Donald Trump who has suffered a series of setbacks in recent weeks, including failed nuclear talks with North Korea, a record goods trade deficit despite his administration’s “America First” policies and the economy missing the White House’s 3 percent annual growth target in 2018.

But the stumble in job growth, which followed two straight months of hefty gains, likely understates the health of the labor market as other details of the closely watched employment report were strong.

The unemployment rate fell back to below 4 percent and a wider measure of underemployment fell by the most ever. In addition, annual wage growth was the best since 2009, and the economy created 12,000 more jobs in December and January than previously reported, bringing the total for the two months to 538,000.

“We had warned that recent employment gains had overstated the underlying strength of the U.S. labor market,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “And the correction now came in February with a bang, rather than spread out over various months.”

Federal Reserve Chairman Jerome Powell made no mention of the latest numbers in remarks delivered more than 12 hours later, noting simply that most measures of the labor market “look as favorable as they have in many decades” and adding that there is “nothing in the outlook demanding an immediate policy response.”

But the mixed report was another indication the economy, which in July is set to mark a record 10 years of expansion, is slowing as the stimulus from a $1.5 trillion tax cut and increased government spending ebbs.

And it supports what Powell on Friday called the Federal Reserve’s “patient, wait-and-see approach to considering any alteration in the stance of policy.”

The record goods trade deficit is also hurting activity as well as slowing global economies. Growth estimates for the first quarter are around a 1 percent annualized rate.

Economists polled by Reuters had forecast nonfarm payrolls rose by 180,000 jobs last month. In addition to the weather and rising worker shortages, a stock market selloff and jump in U.S. Treasury yields in late 2018, which tightened financial market conditions, also likely curbed hiring.

The length of the average workweek fell to 34.4 hours last month from 34.5 hours in January.

“All this report did was remind people that the economy is decelerating and a moderating economy doesn’t create a massive number of new positions,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

U.S. stocks fell as the employment report added to concerns of softening global growth sparked by weak China export data and a prolonged slowdown in eurozone. The dollar dropped against a basket of currencies. U.S. Treasury prices were mixed.

SOLID WAGE GAINS

Job gains over the last two months averaged 186,000 per month, well above the roughly 100,000 needed to keep up with the working-age population. The unemployment rate fell two-tenths of a percentage point to 3.8 percent in February, also as federal government workers who were temporarily unemployed during a 35-day partial shutdown returned to work.

The longest shutdown in U.S. history ended on Jan. 25.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 7.3 percent, the lowest since March 2001, from 8.1 percent in January. The decline in the so-called U6 rate was the largest since the BLS launched the series in 1994.

Average hourly earnings rose 11 cents, or 0.4 percent, in February after gaining 0.1 percent in January. That raised the annual increase in wages to 3.4 percent, the biggest gain since April 2009, from 3.1 percent in January.

Overall, wage inflation remains moderate. A report on Thursday showed labor costs rising only 1.4 percent in 2018, the smallest gain since 2016, after increasing 2.2 percent in 2017.

Economists say employers have kept hiring at a strong pace despite low unemployment as more people returned to the labor force, including students, women and people who had dropped out to collect disability benefits. They, however, say that source of labor supply is dwindling.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged last month at more than a five-year high of 63.2 percent. Economists expect job growth to average about 150,000 this year.

Last month, employment at construction sites fell by 31,000 jobs, the biggest drop since December 2013, after increasing by 53,000 in January. The leisure and hospitality sector added no jobs after payrolls increased by 89,000 in January.

The manufacturing sector created 4,000 jobs, the fewest since July 2017, after hiring 21,000 workers in January. The diffusion index of manufacturing employment, which measures the proportion of industries that showed job gains during the month, fell to 51.3 in February.

“Weakness in capex and exports, much of it tied to knock-on effects from the tariffs and trade-war confusion generally, are likely behind the slowdown in hiring by the manufacturing sector,” said Steve Blitz, chief U.S. economist at TS Lombard in New York.

Retail payrolls fell by 6,100 jobs. There were also job losses in the utilities as well as transportation and warehousing industries. Government payrolls dropped by 5,000 jobs last month, pulled down by declines both local and state government education.

Professional and business services employment increased by 42,000 jobs in February. The education and health care sector added only 4,000 jobs.

Reporting by Lucia Mutikani; Editing by Paul Simao and Chizu Nomiyama

Our Standards:The Thomson Reuters Trust Principles.

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U.S. whiskey exports dry up as tariffs bite

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(Reuters) – American whiskey exports slumped in the second half of 2018, taking a blow from higher duties by the country’s trading partners following President Donald Trump’s tariffs on steel and aluminum imports, an industry group said on Thursday.

A man drinks American whiskey at a bar in Shanghai, China, April 6, 2018. Picture taken April 6, 2018. REUTERS/Aly Song

Canada, China, Mexico and the European Union slapped import duties ranging from 10 percent to 25 percent on U.S whiskey and bourbon last year, resulting in a 11 percent drop in U.S. whiskey exports in the second half, according to a report from the Distilled Spirits Council.

For the first six months of 2018, whiskey exports grew 28 percent compared to the same period in 2017, partly helped by companies like Jack Daniels maker Brown-Forman Corp, fast-tracking shipments overseas, especially to Europe, before the tariffs kicked in.

Overall for the full-year 2018, whiskey exports rose 5.1 percent to $1.18 billion, a significant drop from the 16 percent rise seen in 2017.

Exports to the European Union fell 13.4 percent in the second half of the year, after rising 33 percent during the first six months.

The European Union, which imposed a 25 tariff on American whiskey, is the largest market for the liquor, accounting for nearly 60 percent of total exports, according to the Council.

Earlier in March, Brown-Forman said absorbing the costs of tariffs in key European markets was the primary reason for the decline in its third-quarter gross profit margin.

The company also said its sales would take a hit in 2019 if the tariffs were to remain in place.

“The damage to American whiskey exports is now accelerating, and this is collateral damage from ongoing global trade disputes,” Distilled Spirits Council Chief Executive Officer Chris Swonger said.

Total U.S. spirits exports rose 9.5 percent to $1.8 billion in 2018, but also slowed from 2017, the report showed.

Reporting by Uday Sampath in Bengaluru; Editing by Shailesh Kuber

Our Standards:The Thomson Reuters Trust Principles.

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Exclusive: Ethiopian crash captain untrained on 737 MAX simulator

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ADDIS ABABA (Reuters) – The captain of a doomed Ethiopian Airlines flight was unable to practice on a new simulator for the Boeing 737 MAX 8 before he died in a crash with 157 others, a pilot colleague said.

Yared Getachew, 29, was due for refresher training at the end of March, his colleague told Reuters, two months after Ethiopian Airlines had received the simulator.

The March 10 disaster, following another MAX 8 crash in Indonesia in October, has set off one of the biggest inquiries in aviation history, focused on whether pilots were sufficiently versed on a new automated system.

In both cases, the pilots lost control soon after take-off and fought a losing battle to stop their jets plunging down.

In the Ethiopian crash, it was not clear if Yared’s colleague – First Officer Ahmednur Mohammed, 25, who also died in the crash – had practiced on the new MAX simulator.

Globally, most commercial airline pilots refresh training in simulators every six months. It was not clear if Yared or Ahmednur would have been trained on the new simulator or an older one for 737s that their airline also owned.

The MAX, which came into service two years ago, has a new automated system called MCAS (Maneuvering Characteristics Augmentation System). It is meant to prevent a loss of lift which can cause an aerodynamic stall sending the plane downwards in an uncontrolled way.

“Boeing did not send manuals on MCAS,” the Ethiopian Airlines pilot told Reuters in a hotel lobby, declining to give his name as staff have been told not to speak in public.

“Actually we know more about the MCAS system from the media than from Boeing.”

Under unprecedented scrutiny and with its MAX fleet grounded worldwide, the world’s largest planemaker has said airlines were given guidance on how to respond to the activation of MCAS software. It is also promising a swift update to the system.

Ethiopian Airlines declined to comment on the remarks of its pilot to Reuters about the simulator and MCAS system.

Additional reporting by Allison Lampert in Montreal and Tracy Rucinski in Chicago; Writing by Jamie Freed and Katharine Houreld; Editing by Andrew Cawthorne

Our Standards:The Thomson Reuters Trust Principles.

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U.S.-backed fighters say operation at last Islamic State enclave not over

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DEIR AL-ZOR, Syria (Reuters) – U.S.-backed Syrian fighters said they were still searching territory captured from Islamic State at its final enclave in eastern Syria on Thursday and denied a report the jihadists had been finally defeated.

FILE PHOTO: Smoke rises from the last besieged neighborhood in the village of Baghouz, Deir Al Zor province, Syria, March 18, 2019. REUTERS/Stringer/File Photo

The final capture of the Baghouz enclave at the Iraqi border will mark the end of Islamic State territorial rule that once spanned a third of Syria and Iraq after years of military campaigns by a range of international and local forces.

After weeks of fighting, the U.S.-backed Syrian Democratic Forces (SDF) took a big step towards capturing the besieged area on Tuesday when they seized an encampment where the jihadists had been mounting a last defense of the area.

“Combing continues in the Baghouz camp,” an SDF media official said, citing commanders of the operation on Thursday, after the Syrian Kurdish news outlet Hawar reported that the entire enclave had been captured and IS defeated.

“There is no truth (to the report of) the complete liberation of the village,” the official said.

The report on Hawar News, which is close to the Kurdish-led administration that runs much of northern Syria, was later removed from its website.

U.S. President Donald Trump said on Wednesday that a “tiny spot” of remaining IS territory would be “gone by tonight”.

French Foreign Minister Jean-Yves Le Drian, whose country has participated in the campaign, said on Wednesday he expected the announcement of the “final territorial defeat” to be made in the “next few days”.

Though the defeat of IS at Baghouz ends its grip over territory, it remains a threat, with fighters operating in remote territory elsewhere and capable of mounting insurgent attacks.

The U.S. military has warned that Islamic State may still count tens of thousands of fighters, dispersed throughout Iraq and Syria, with enough leaders and resources to present a menacing insurgency.

The Pentagon’s internal watchdog released a report last month saying Islamic State remained an active insurgent group and was regenerating functions and capabilities more quickly in Iraq than in Syria.

It warned the group could resurge in Syria within six to 12 months and regain limited territory without sustained pressure.

The United States believes Iraq is the location of its leader Abu Bakr al-Baghdadi, who stood at the pulpit of the great medieval mosque in Mosul in 2014 to declare himself caliph, sovereign over all Muslims.

GRAPHIC – How Islamic State lost Syria: tmsnrt.rs/2O7l4mN

Additional reporting by Rodi Said in Qamishli, Syria; Writing by Tom Perry in Beirut; Editing by Raissa Kasolowsky

Our Standards:The Thomson Reuters Trust Principles.

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