Unemployment Rate Dips To 8.8 Percent In March

The unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began.

The economy added 216,000 jobs last month, the Labor Department said Friday. Factories, retailers, the education and health care sectors, and professional and financial services all expanded payrolls. Those job gains offset layoffs by local governments.

Another month of brisk hiring provided the latest sign that the economy is strengthening nearly two years after the recession ended.

Private employers, the backbone of the economy, drove the gains. They added more than 200,000 jobs for a second straight month. It was the first time that's happened since 2006, more than a year before the recession started.

"There are jobs gains in the service sector, there are job gains in the manufacturing sector," said John Silvia, chief economist at Wells Fargo.

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Government Payrolls Shrink

But public-sector job losses have been mounting in recent months as stimulus spending has wound down. "The job losses are primarily in government, especially state and local government. That's consistent with what you would expect," Silvia said.

White House economic adviser Austan Goolsbee said, "As long as millions of people are looking for jobs, there is still considerable work to do to replace the jobs lost in the downturn. Nonetheless, the steep decline in the jobless rate and the solid employment growth in recent months are encouraging."

The unemployment rate dipped from 8.9 percent in February. The rate has fallen a full percentage point over the past four months. That's the sharpest drop since 1983.

"The U.S. labor market is finally making some serious progress," said Sal Guatieri, economist at BMO Capital Markets Economics.

Economists predict employers will add jobs at roughly the same pace for the rest of this year. That would generate about 2.5 million new positions. Still, that would make up for only a small portion of the 7.5 million jobs wiped out during the recession.

Long-Term Unemployment Soars

But millions of people have been out of work for an extended period. The average duration of unemployment rose to 39 weeks — or nearly 10 months in March. That's the longest on records dating back to 1948.

"The longer someone is out of work, the harder it is for them to get back in," NPR's Tamara Keith said. "Their skills atrophy; employers aren't interested in talking to people who have a huge gap in their resume." And when they do find jobs, it's often at much lower pay than what they made before, she added.

A big factor in the lower unemployment rate is that many people who stopped looking for jobs during the recession still haven't started looking for one. So they're not counted as unemployed. The proportion of people who either have a job or are looking for one is surprisingly low for this stage of the recovery.

If many out-of-work people start looking for work again, they will be counted as unemployed. So the unemployment rate could go up, even if the economy adds jobs.

Local governments, wrestling with budget shortfalls, cut 15,000 workers last month and are expected to keep shedding jobs. Home prices are falling amid weak sales and a record number of foreclosures. Higher food and gas prices are leaving consumers with less disposable income to spend on other goods and services.

Earnings Remain Flat

Workers' paychecks were flat in March. Average hourly earnings held steady at $22.87, unchanged from February. Workers have little bargaining power to demand big pay raises because the job market is still healing slowly.

Average earnings have risen about 2 percent in the past year, but that's not enough to offset the sharp rise in gasoline prices. "So fill up the tank twice a month and those wage gains are basically gone," Keith said.

The number of unemployed people dipped to 13.5 million in March, still almost double since before the recession began in December 2007.

Including part-time workers who would rather be working full time, plus people who have given up looking altogether, the percentage of "underemployed" people dropped to 15.7 percent in March.

Professional and business services, including accountants, bookkeepers, engineers and computer designers, added 78,000 positions, the most since November. Of those, 29,000 were temporary positions.

Factories added 17,000 jobs in March, marking the fifth straight month of gains. Retailers added nearly 18,000 jobs, after cutting them in February. Financial services expanded payrolls by 6,000, following two straight months of cutbacks. Education and health services expanded employment by 45,000, and leisure and hospitality added 37,000 jobs.

Aside from layoffs by local governments, other sectors eliminating jobs included construction, transportation and warehousing, and information services, such as telecommunications. State government hiring was flat after four straight months of layoffs.

The Associated Press and NPR's Tamara Keith contributed to this report.

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