(Reuters) - U.S. employers added the fewest number of workers in 10 months in March, but a drop in the unemployment rate to a near 10-year low of 4.5 percent pointed to a labor market that continues to tighten.
* Total payrolls up 98,000 vs 180,000 estimate & downwardly revised 219,000 prior (original 235,000)* Private payrolls up 89,000 vs 175,000 estimate & downwardly revised 221,000 prior (original 227,000)
* Unemployment rate down to 4.5 pct vs 4.7 pct estimate & 4.7 pct prior
* Average hourly earnings growth 0.2 pct vs 0.2 pct estimate & upwardly revised 0.3 pct prior (originally 0.2 pct)
* U-6 rate 8.9 pct from 9.2 pct* Labor force participation unchanged from 63.0 pct
* Household survey: Workforce grew by 145,000, employed rose by 145,000, unemployed fell by 326,000
"It's a little less than expected. This is an economy that's getting better but it's not getting better quickly."
"I think the Fed has wanted to see wage growth a little better, and they're not getting it. What does that tell you? At a lower wage, jobs are being created. It doesn't make for a rapidly expanding GDP."
"The market should sell off a bit. It's going to be more about jobs than Syria."
"There were government jobs cut and they're not hiring. That had something to do with it."
"It's also weather related. Construction was down. The retail sector lost 30,000 jobs."
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:
"What you have to consider is that the change in payrolls is at odds with other data, the change in GDP, claims at cycle lows, withheld income taxes surging. Something doesn't smell right. The reality is that this payroll change is the outlier.
"I think the right move is to fade the headline, particularly in the context of underlying data that actually has a whiff of inflation.
"The guts of the report are firm if you look at the drift lower in the unemployment rate, average hourly earnings with the upward revision pointing to continued wage pressure, the underemployment rate. All of that effectively equals an inflationary undertone and that is far more important than a headline jobs change that's totally at odds with the other data, and more critically that's what the Fed is going to be more concerned about."
AARON KOHLI, INTEREST RATE STRATEGIST, BMO CAPITAL MARKETS, NEW YORK:
"It was certainly disappointing, everyone is looking for any caveat due to the weather. Generally it was a negative headline print, but I think the weather effects are what is keeping the market from running away with it. ADP gave us a bit of a head fake. The original numbers were 150,000, and it's easy to make the case with weather that there would be some miss there, along with the head fake of ADP's upward revisions."
STOCKS: S&P e-mini futures slip further, down about 0.3 pct
BONDS: 2- and 10-year Treasury yields fall, 10-year yield slides below 2.30 pct; yield curve flattens
FOREX: The dollar index slips, led by gains in yen and euro
RATE FUTURES: Fed funds contract for June 2017 ticks 0.5 basis point higher; September up 2 basis points
Americas Economics and Markets Desk; +1-646 223-6300