Jobless figures boost outlook
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The nation's employers threw open their doors and stepped up hiring last month, the government reported yesterday, providing a bright spot for an economy that has looked wobbly in the face of a housing slump and drop-off in business equipment spending.
Businesses added a better-than-expected 180,000 workers to their payrolls in March, the Labor Department said, up from upwardly revised gains of 113,000 in February and 162,000 in January. Economists had forecast employers to add about 135,000 in March.
The stronger job market caused the unemployment rate to fall a notch to 4.4 percent, down from February's 4.5 percent, matching October's five-year low. And hourly wages rose an average 0.3 percent, putting year-over-year gains at 4 percent.
"It was a great report," said Stuart Hoffman, chief economist at PNC Financial Services Group, Downtown.
"You have more people working at higher wages. That makes you believe consumer spending is going to hold up pretty well," adding buoyancy to the overall economy.
Mr. Hoffman and other economists said the report reinforced their belief that the Federal Reserve would continue to leave interest rates alone, a stance the central bank has maintained since August.
The labor market report "serves as a counterweight to the recent bleak reports on business capital equipment spending," said Nigel Gault, chief U.S. economist for Global Insight in Massachusetts.
"If businesses were pulling back on both capital spending and hiring, then recession scenarios would gain credibility," he said. "But businesses are still hiring, the unemployment rate has fallen again and earnings growth remains solid."
Job gains in March were widespread, including a turnaround in construction, which added 56,000 positions after shedding 61,000 jobs in February, a loss attributed to unusually bad weather.
One notable exception last month was manufacturing, which gave up another 16,000 jobs, the ninth straight month of losses.
Over the last seven years, manufacturing has eliminated some 3.2 million jobs, solemn news for less educated workers who traditionally have looked to the industry for the best opportunity for good pay.
"For high school graduates without specialized skills or training, jobs offering good pay and benefits remain tough to find," said Peter Morici, economist and business professor at the University of Maryland.
One industry observer saw a significant downside to yesterday's jobs report, saying it signals possible labor shortages that could rock the economy.
A strong labor market "can be great for workers since it means increased wages, better perks and even the possibility of lucrative signing bonuses," said John Challenger, chief executive at the Chicago-based outplacement firm Challenger, Gray & Christmas. "However, labor shortages can be damaging to the economy, increasing inflationary pressures and forcing companies to postpone expansion plans due to the inability to staff new operations."
The current labor picture, "underscores the significant potential for a rapid economic slowdown in the coming months," Mr. Challenger said.
When figures on the gross domestic product for the first quarter are tallied, many economists are expecting a 2 percent gain, down from 2.5 percent in the fourth quarter. Global Insight is projecting a much weaker 1.3 percent gain in GDP, the broadest measure of the size and output of the nation's economy.
Fed Chairman Benjamin Bernanke has said he believes strong consumer spending, supported by gains in jobs and wages, will keep the economy from slipping into a recession this year.
The stock market was closed yesterday for Good Friday. PNC's Mr. Hoffman expects the market will get a lift from the jobs report when it reopens Monday.
First Published April 7, 2007 12:00 am