The U.S. economy added more jobs than forecast in March and the unemployment rate unexpectedly declined to a two-year low of 8.8 percent, a sign the labor-market recovery is gathering speed.
Payrolls increased by 216,000 workers last month after a revised 194,000 gain the prior month, the Labor Department said today in Washington. Economists projected a March gain of 190,000, according to the median estimate in a Bloomberg News survey. The jobless rate dropped from 8.9 percent in February, the fourth straight decrease.
Record exports and gains in business and consumer spending are prompting companies like Chrysler Group LLC and Kohl’s Corp. to boost staff, helping the U.S. weather the highest energy prices in more than two years. The improving economy encouraged Federal Reserve policy makers last month to signal they were unlikely to extend bond purchases beyond June.
“This is consistent with a labor market recovery that is broadening,” Robert Dye, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “We’re starting to see more and more small businesses participating in hiring. That’s providing the foundation of a self-sustaining recovery.”
Payroll estimates in the Bloomberg survey of 83 economists ranged from gains of 150,000 to 295,000. February was revised up from a previously reported gain of 192,000, while January payrolls increased 68,000 after a prior estimate of 63,000. The unemployment rate was projected to hold at 8.9 percent, according to the survey median.
While companies stepped up hiring, earnings and hours stagnated.
Private hiring, which excludes government agencies, rose by 230,000 in March, more than the median 206,000 median forecast in the Bloomberg survey, after a 240,000 increase in February. The back-to-back gain was the biggest since February-March 2006.
Factory payrolls increased by 17,000 last month, less than the survey forecast of a 30,000 gain.
The separate survey of households showed the size of the labor force increased by 160,000 in March and employment grew by 291,000. That pushed the share of the population in the labor force up to 58.5 percent from 58.4 percent a month earlier.
Government payrolls decreased by 14,000 last month reflecting cuts at the local level. Federal government employment rose by 1,000.
Employment at service-providers rose 185,000 in March, the most since May 2010. Temporary-help services companies added 28,800 workers last month. Healthcare and leisure and hospitality businesses also boosted payrolls. Construction payrolls fell 1,000 and retail trade employment increased 17,700.
The March jobs reading is likely be the first of the year that wasn’t skewed by weather. Winter storms constrained payrolls in January, prompting a February rebound when temperatures were closer to normal for the month.
The manufacturing industries that account for 11 percent of the economy are likely to remain at the forefront of the recovery as businesses replenish inventories, the auto industry rebounds and China and other emerging markets boost imports of U.S.-made goods.
Auto sales, after climbing for six consecutive months, reached the highest level in more than a year in February.
Chrysler, aiming for its first net profit since emerging from bankruptcy in 2009, plans to hire 1,000 engineers and high-tech workers for its small and midsized vehicles. The Auburn Hills, Michigan-based company is also urging its dealers to hire more salesmen and service workers to help boost sales by 32 percent this year.
“Hiring additional personnel in preparation for the spring market is essential for success in 2011,” Peter Grady, vice president of Chrysler’s network development and fleet, said in a memo to dealers last month.
Kohl’s said this week that it plans to open a new e- commerce distribution center in Edgewood, Maryland, in July and hire 1,200 workers over the next three years.
Economic growth accelerated to a 3.1 percent annual rate in the fourth quarter of 2010 as consumer spending climbed by the most in four years.
Oil prices that closed at $106.72 yesterday, the highest since September 2008, may keep climbing should Middle East political turmoil continue unabated, raising the risk that consumer spending will slow in coming months.
U.S. companies are still trying to gauge the effects of the March 11 earthquake in Japan and the subsequent nuclear crisis on international supply chains. Toyota Motor Corp. expects assembly interruptions that may affect North America plants.
The Fed, after its latest policy meeting March 15, pledged to continue its program of purchasing $600 billion of bonds by June, in order to “promote a stronger pace of economic recovery.” Policy makers also said the economy was on “firmer footing” and acknowledged a rise in commodity prices, signaling deflation risk had diminished and they were unlikely to expand the bond purchase plan.
Average hourly earnings held at $22.87 in March, today’s report showed, while the average work week for all workers stayed at 34.3 hours.
The so-called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — fell to 15.7 from 15.9 percent.
The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose to 45.5 percent of all jobless.
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