WASHINGTON — The most-awaited sign that the U.S. economic recovery is firmly taking root arrived Friday in a Labor Department report that showed vigorous private-sector hiring as the unemployment rate fell for the fourth consecutive month.
However, rising food and fuel prices remain threats to a strong economic revival, analysts warned.
Employers added a robust 216,000 jobs in March, the Bureau of Labor Statistics reported, as the unemployment rate ticked down one-tenth of a percentage point to 8.8 percent. Private-sector employment rose by 230,000, but a net loss of 14,000 government jobs nationwide dragged down the broader number.
The figures add up to an economy firing on almost all cylinders.
“The job market is kicking into full gear. Job growth has accelerated to 200,000 per month, which is sufficient to meaningfully bring down unemployment,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “It is also encouraging the job growth is increasingly broad-based across industries. Only state and local governments are laying off workers.”
Manufacturers added 17,000 jobs in March, the fifth straight month that they’ve boosted employment. The vigorous health care sector added almost 37,000 jobs, and the important category of professional and business services — which includes well-paying white-collar jobs — surged by 78,000.
Temporary employment, usually a harbinger of future hiring, also was up by 28,800 jobs.
Even if the March numbers are repeated in the months ahead, however, it will take a long time to erase the 8 million job losses suffered during the Great Recession of 2007-09, the worst since the 1930s. But March suggests the recovery is taking root.
“The numbers were solid, indicating that business confidence is improving to the point where hiring is beginning to step up,” said Chris Varvares, the president of forecaster Macroeconomic Advisers. “Numbers like this will generate income, increase confidence for consumers and are the kinds of numbers we need to see on an ongoing basis to have the self-sustaining recovery and expansion that is in our forecast.”
Even though the report arrived on April Fools' Day, Friday’s numbers were no prank. They followed by a day the close of the first quarter of 2011, when U.S. stocks surged on expectations that the American economy is getting its game back.
The benchmark S&P 500 gained 5.4 percent in the first three months of this year, the Dow Jones Industrial Average was up 6.7 percent, its best quarter since 1999, and the tech-heavy Nasdaq composite rose 4.8 percent.
The White House welcomed the strong March employment numbers.
“The full percentage point drop in the unemployment rate over the past four months is the largest such decline since 1984, and, importantly, it has been driven primarily by increased employment, rather than people leaving the labor force,” Austan Goolsbee, the head of the White House Council of Economic Advisers, said in a statement. Still, he cautioned that “there will surely be bumps in the road ahead.”
One shadow grew darker Friday, as crude oil traded above $107 a barrel on the New York Mercantile Exchange, threatening to slow the recovery. High oil prices bring pain at the gasoline pump, sapping consumer spirits and spending power.
“Higher energy and other commodity prices are the most serious threat to optimism regarding the job market and broader economy. Oil prices much above current prices for more than a few weeks will do serious damage,” Zandi warned.
Higher gasoline prices are like a tax on consumption. Shoppers may cut back their purchases of other goods if pump prices remain high. The AAA auto club said the nationwide average price for a gallon of unleaded gasoline stood at $3.61, up from $3.38 a month ago and $2.80 a year ago Friday.
“While consumption has been improving in recent months, the weak growth in income coupled with the ongoing rise in gasoline prices could prompt consumers to cut back on more discretionary purchases,” a Bank of America Merrill Lynch Global Research report said Friday.
Consumer confidence “dropped sharply in March to its lowest level since December, following five straight monthly increases,” economists at Wells Fargo Securities noted. “Rising gasoline prices and uncertainty on Japan and the Middle East likely helped drive the significant decline.”
In addition, wage growth was flat in March, the Labor Department noted. For the first three months of the year, wages grew by 1.7 percent, even as inflation — an increase of prices across the economy — advanced at a 2.1 percent annual rate.
With the U.S. recovery gathering steam and demand for materials rising, concerns are growing that several years of low interest rates may lead to a spike in inflation. Wal-Mart U.S. CEO Bill Simon made headlines Wednesday when he warned that he expects an unprecedented spike in inflation.
Many Americans are grumbling that official measures aren’t fully accounting for how rising food and gasoline prices are eroding their spending power.
While Friday’s report was encouraging, plenty of unpleasant signs remain.
“The number of long-term unemployed remained high at 6.1 million, 45.5 percent of total unemployment,” Keith Hall, the commissioner of the Bureau of Labor Statistics, said in congressional testimony Friday morning. “Over the month, the number of individuals who were working part time although they would have preferred full-time work was 8.4 million, down from 9 million a year earlier.”
To some economists, the stubbornly high rate of long-term unemployed points to a serious change in economic reality.
“It is clear that some of the damage to the job market is structural. With a sizable portion of the potential workforce being separated from employment for long periods of time, the risk is that their skills will deteriorate and thus that they will have a much more difficult time reacquiring jobs,” the Bank of America Merrill Lynch report said, suggesting that the definition of full employment may rise from a 5 percent unemployment rate to around 7 percent.
MARCH BY THE NUMBERS
- Construction, down 1,000.
- Transportation and warehousing, down 1,000.
- Financial services, up 6,000.
- Leisure and hospitality, up, 37,000
- Manufacturing, up 17,000.
- Health care, up 36,600.
- Government, down 14,000.
- Retail, up 17,700.
- Professional and business services, up 78,000.
- Temporary help services, up 28,800.
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