The pace of US job growth remained robust in March while wages climbed more than forecast, but a rise in the jobless rate added credence to the Federal Reserve’s caution on the economy. The labour market has been a bright spot in the world’s most important economy, producing consistent payroll gains despite slow growth for many US trading partners and a sharp cutback in investment and jobs in the energy sector caused by a sustained period of low oil prices.

The US economy added 215,000 jobs in March, down from 245,000 the previous month. That compares with economists’ expectations of 205,000.

Meanwhile, the jobless rate ticked up by 0.1 percentage point to 5 per cent, compared with expectations that it would hold steady. That is just above the rate that many economists consider to be the structural level in a well-functioning economy. It also represents an improvement from the crisis-era peak of 10 per cent in October 2009.

Even as slack in the labour market has tightened, several measures have remained subdued, causing concern among Fed policymakers. Fed chair Janet Yellen said this week there was “a little more slack in the labour market than one would surmise by looking at the unemployment rate alone”.

Perhaps the most closely watched statistic has been wage growth, which has remained fairly tepid. Average hourly earnings rose 0.3 per cent in March from the previous month, while the year-on-year rate climbed to 2.3 per cent from 2.2 per cent in February.

The sluggish pace is of particular concern to policymakers since slow growth and low energy prices have weighed heavily on inflation abroad. While the Fed does not want inflation to pick up too much, excessively low inflation could weigh on economic growth by cooling consumer spending.

Ms Yellen also warned of the potential for the weak global environment to begin weighing on the US labour market, even if that has not yet been indicated in the data. “If foreign developments were to adversely affect the US economy by more than I expect, then the pace of labour market improvement would probably be slower, which would also tend to restrain growth in both wages and prices,” she said this week.

That has caused the Fed to take a cautious tone on its rate rise plans, forecasting in March just two quarter-point rate increases this year from a December estimate of four. Fed fund futures handicap just one raise this year, according to Bloomberg. – Copyright The Financial Times Limited 2016