WASHINGTON – The nation’s unemployment rate dropped to its lowest level in two years in March, and the outlook is brightening as major companies plan to add more jobs.
Increased hiring cut the unemployment rate to 8.8 percent – an encouraging sign for the unemployed and for President Barack Obama’s re-election prospects.
Still, the job gains haven’t led many people who stopped looking for work during the recession to start again. Fewer than two-thirds of American adults are either working or looking for work – the lowest participation rate in 25 years.
The economy added 216,000 jobs last month, the government said Friday. Factories, retailers, the education and health care sectors, and professional and financial services all expanded payrolls. Those gains offset layoffs by local governments, construction and telecommunications.
The improved outlook propelled the Dow Jones industrial average to a 2011 high in early trading. The Dow closed up about 57 points, or 0.46 percent.
The private sector 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.
And it could mark a turning point in job creation. America’s largest companies plan to step up hiring in the next six months, a March survey of CEOs found. Google, Siemens Corp. and Ford Motor Co., among others, have said they plan to add workers.
Economists expect the stronger hiring to endure throughout the year, producing a net gain of about 2.5 million jobs for 2011. Even so, that would make up for only a small portion of the 7.5 million jobs wiped out during the recession. The economy must average up to 300,000 new jobs a month to significantly lower unemployment.
The unemployment rate has fallen a full percentage point since November, the sharpest four-month drop since 1983. Stepped-up hiring is the main reason. But a more sobering factor is that the number of people who are either working or seeking a job remains surprisingly low for this stage of the recovery.
People without jobs who aren’t looking for one aren’t counted as unemployed. Once they start looking again, they’re classified as unemployed, and the unemployment rate can go back up. That can happen even if the economy is adding jobs.
Just 64.2 percent of adults have a job or are looking for one – the lowest participation rate since 1984. The number has been shrinking for four years. It suggests many people remain discouraged about their job prospects even as hiring is picking up.
Wages were flat in March. And over the past 12 months, they’ve trailed inflation. Workers have scant bargaining power to demand raises because the job market is still healing only slowly.
Job growth is getting no help from local governments, which cut 15,000 workers last month while wrestling with budget shortfalls. They are expected to keep shedding jobs.