Employers step up hiring, jobless rate drops

WASHINGTON Fri Apr 1, 2011 4:20pm EDT

1 of 2. A job seeker walks the floor at a large career fare at Rutgers University in New Brunswick, New Jersey, in this January 6, 2011 file photo.

Credit: Reuters/Mike Segar

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WASHINGTON (Reuters) - U.S. employment grew firmly for a second straight month in March and the jobless rate hit a two-year low of 8.8 percent, underscoring a decisive shift in the labor market that should help to underpin the recovery.

Nonfarm payrolls rose 216,000 last month, the largest increase since last May, the Labor Department said on Friday. The gain built on the 194,000 new positions added in February.

The quickening pace of job growth has pulled the unemployment rate down a full percentage point since November, the largest four-month decline since February 1984.

A separate report from the Institute for Supply Management showed factory activity grew strongly last month, although it backed off a nearly seven-year high touched in February.

The jobs data confirmed the labor market was strengthening despite signs economic activity had been held back early in the year by bad weather and rising energy prices.

Still, the report was likely not robust enough to push the Federal Reserve off its ultra-easy monetary policy course.

"It provides more evidence that the economy is gaining a self-sustaining momentum, but it also says we still have a long way to go," said Julia Coronado, a senior economist at BNP Paribas in New York.

The economy has recovered only a fraction of the more than 8 million jobs lost in the recession. Economists say job growth between 250,000 and 300,000 a month is needed to have a sizable impact on the pool of 13.5 million jobless Americans.

Investors on Wall Street cheered the data and lifted the blue-chip Dow Jones industrial average to its highest level since June 2008. U.S. government bond prices rose modestly, while the dollar climbed to a more than six-month high against the yen.

FED DEBATE

The improvement in the labor market provides fuel for an already lively debate at the Fed over how soon the U.S. central bank should withdraw its extensive support for the economy.

High unemployment and a lack of wage gains -- earnings were flat in March and have barely grown so far this year -- argue for keeping supports in place, in the view of some officials. Others worry keeping interest rates close to zero for too long will provide a spark for inflation.

In a sign the central bank is unlikely to rush to the exits, the head of the powerful New York Federal Reserve Bank on Friday pushed back against the hawkish rhetoric from some counterparts, saying the pick-up in job growth was welcome but not a reason to reverse course.

"We are still very far away from achieving our dual mandate of maximum sustainable employment and price stability," New York Fed chief William Dudley said.

Investors reacted to the jobs report by raising their bets on the Fed tightening credit by year-end but rowed back a bit after Dudley's cautious comments.

The 0.1 percentage point drop in the unemployment rate, which took it to its lowest level since March 2009, came even as more people entered the labor force, a signal of rising optimism on job prospects. But of those unemployed, 45.5 percent had been out of work for 27 weeks or more.

The improving employment picture could increasingly coax those who had given up the search for work to re-enter the labor market, which could push the jobless rate higher.

"It is always possible that as the job market improves, people will start looking again and the unemployment rate could go up," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "But the normal pattern is once it starts coming down as rapidly as it has over the last few months, it keeps on going down."

FACTORY MUSCLE

Government employment fell for a fifth straight month, but the private sector added 230,000 new positions, with all but 31,000 of those jobs coming in the service sector. It was the 12th straight month of private sector job gains.

Manufacturing employment growth slowed, while the construction sector shed 1,000 employees. A report issued by the Commerce Department on Friday showed construction spending fell in February to its lowest level since October 1999.

Despite slower jobs growth in the sector, the manufacturing report showed factories continued to help power the recovery in March, with activity rising for a 20th straight month.

Strong March sales results from automakers, which showed high gasoline prices lifting sales of smaller, fuel-efficient cars, suggested more production gains ahead. They also signaled that consumer spending retains some vigor after a weak start to the year.

(Additional reporting by Doug Palmer; Editing by Dan Grebler)

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Comments (41)
DrakeCage wrote:
The US economy being a consumer oriented one should not be exposed to a negative consumer confidence. I commend the current administration for the serene and pragmatic approach towards restoring the US economy but I also think Obama and his team should realize that their foreign policy decisions now may affect consumer confidence back at home.

Apr 01, 2011 8:15am EDT  --  Report as abuse
GRRR wrote:
Shock! Sustained job growth months BEFORE the GOP have made their threatened $100B in cuts.

Apr 01, 2011 8:59am EDT  --  Report as abuse
Dahc wrote:
@GRRR: i know, right…?

Apr 01, 2011 9:05am EDT  --  Report as abuse
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