Jobs Report: Economy 'Is On Path to Sustainable Recovery'

Published: Friday, 2 Apr 2010
11:21 AM ET

By: Reuters with CNBC.com

US employers created jobs in March at the fastest rate in three years as private firms stepped up hiring, the strongest signal yet that the economic recovery is on a solid footing and needs less government help.

Non-farm payrolls rose 162,000 and the unemployment rate held steady at 9.7 percent for a third straight month, the Labor Department said Friday.

The payrolls increase was only the third since the economy sunk into recession in late 2007 and was the largest gain since March 2007.

Private employers hired more workers than expected, while temporary hiring for the U.S. decennial census came in below economists' forecasts.

"The economy is on a path to sustainable recovery. The fragility of the recovery is becoming less worrisome," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Job growth is critical to keeping alive the economic expansion that started in the second half of 2009 once government stimulus efforts and a boost from a rebuilding inventories by businesses fade.

Market reaction was mostly positive, though muted because of the Good Friday holiday. US stock futures rose slightly in a shortened session, while the cash market was closed. The US dollar rose broadly , while US Treasury prices fell, pushing the yield on the 10-year bond up to near 4 percent.

"As the market is telling you, this is a half-full, half-empty report," Pimco's Mohamed El-Erian told CNBC shortly after the jobs numbers were released. "The amount of long-term unemployed continues to go up."

"The question is: Is it sustainable?" El-Erian added, referring to the economic recovery. "That question is going to play out over the rest of the year."

Payrolls for January were revised upward to show a 14,000 gain instead of a loss of 26,000, while February was adjusted to show only a loss of 14,000. Previously, February had been reported as down 36,000.

Markets had expected non-farm payrolls to rise 190,000 last month and the jobless rate to hold steady at 9.7 percent, but a solid rise in private-sector hiring gave the report a stronger-than-expected tone.

The labor market has lagged the economy's recovery from the worst downturn since the 1930s, creating a political challenge for President Barack Obama.

Voter anger over high unemployment could cost Obama's Democratic party its control of both the Senate and the House of Representatives in November elections.

Christina Romer, a top White House economic adviser, said the employment report showed "continued signs of gradual labor market healing."

Some analysts said the relatively strong details of the report suggested the economy was on a path that could lead the Federal Reserve to raise interest rates as early as late this year.

The U.S. central bank has promised to keep overnight rates—currently near zero—ultra low for an extended period, citing subdued inflation and the likelihood the economic recovery will be moderate.

The Fed has identified unemployment as one of the factors that will determine when it will start raising rates.

"Job creation would help support the positive momentum in the economy, underpinning consumer spending and confidence and making it a sustained recovery," said Michelle Meyer, an economist at Barclays Capital in New York. "If the rest of the data flow this month proves healthy, we believe the Fed will consider removing the 'extended period' language at the April 28 meeting and start hiking rates in September."

The government hired 48,000 temporary workers last month for the decennial census, while private payrolls jumped by 123,000, the biggest increase since May 2007. Private payrolls rose 8,000 in February.

Employment last month was also lifted by a snap back from February's weather-related losses.

Manufacturing added 17,000 jobs in March and construction payrolls grew 15,000 after dropping 59,000 in February.

Payrolls in the service sector increased as retail employment climbed 14,900. Government employment increased 39,000, reflecting the temporary hiring for the census.

The average workweek for all employees rose to 34 hours from 33.9 hours in February.

Despite the sharp turnaround in employment last month, weaknesses still remain.

A broad measure of unemployment that includes the number of workers marginally attached to the labor force and those working part time for economic reasons edged up to 16.9 percent from 16.8 percent in February.

About 44.1 percent unemployed workers in March had been out of a job for 27 weeks or more.

"While things are clearly improving, the private sector is still not positioned to create sufficient numbers of jobs," said Heidi Shierholz and economist at the Economic Policy Institute in Washington. "There is still an urgent need for aggressive policies to create jobs."

http://www.cnbc.com/id/36146865