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U.S. unemployment rate drops to two-year low in March

Business Materials 2 April 2011 11:04 (UTC +04:00)

Azerbaijan, Baku, April 2 / Trend /

The unemployment rate in the U.S. unexpectedly fell to a two-year low of 8.8 percent in March as employers created more jobs than forecast, adding to evidence the labor-market recovery is gaining traction, Bloomberg reported.

Payrolls rose by 216,000 workers last month after a 194,000 gain the prior month, the Labor Department said yesterday in Washington.

"It does look like things have turned the corner," Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, said in an interview with Lisa Murphy on Bloomberg Television's "Fast Forward." "We're finally seeing small- and medium-sized companies hiring."

Stocks climbed as the figures showed the world's largest economy is weathering the highest energy prices in more than two years. Treasuries pared losses after William Dudley, president of the Federal Reserve Bank of New York, said the jobs data shouldn't change the central bank's plans to buy $600 billion of government securities through June.

"I don't see any reason to pull back from that yet," Dudley said in response to reporters' questions about the Fed's bond-buying program after a speech in San Juan, Puerto Rico. In his speech, he said the recovery is "still tenuous" and "far from the mark" of the central bank's goals of full employment.

While companies stepped up hiring, earnings and hours stagnated, the Labor Department's figures showed. Average hourly earnings for production workers rose 0.8 percent over the past six months, the smallest gain for such a period since 2004.

"With the increased pace of hiring, this suggests that increasing numbers of returning jobless workers may be settling for lower wages than they had earned before the recession," David Resler, chief economist at Nomura Securities International Inc. in New York, said in a note to clients.

Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co., said the gain in employment suggests the Fed's bond purchases have been effective.

"Their objective obviously is to improve the economy and to create jobs but also to put a floor under the stock market, and we know that's working," Gross said yesterday in a radio interview on "Bloomberg Surveillance" with Tom Keene.

Private hiring, which excludes government agencies, rose by 230,000 in March after a 240,000 increase in February, the biggest back-to-back gain since 2006.

The separate survey of households showed the size of the labor force increased by 160,000 in March and employment grew by 291,000. That pushed the share of the population that is employed up to 58.5 percent from 58.4 percent a month earlier.

Government payrolls decreased for a fifth straight month in March, reflecting cuts at the local level. Factory payrolls increased by 17,000 last month, while the construction industry shed jobs.

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