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WRAPUP 6-U.S. employers step up hiring, jobless rate drops
April 1, 2011 / 1:21 PM / 7 years ago

WRAPUP 6-U.S. employers step up hiring, jobless rate drops

 * March payrolls rise 216,000, private jobs up 230,000
 * Unemployment rate dips to 8.8 percent from 8.9 percent
 * Data provides fuel for Fed debate but earnings steady
 (Adds details, auto sales)
 By Lucia Mutikani
 WASHINGTON, April 1 (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 .DJI 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.
 INSTANT VIEWS - [ID:nN01113691] [ID:nN01163249]
 ANALYSIS: - Where are those jobs? [ID:nN0196689]
 Reuters Breaking Views - US joblessness stubbornly stickier
 this cycle [ID:nN01128053]
 Graphic-Payrolls gap:
 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. [ID:N01154414]
 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."
 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. [ID:nN01199996]
 (Additional reporting by Doug Palmer; Editing by Dan Grebler)

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