U.S. employers added just 88,000 jobs in March, the fewest in nine months and a sharp retreat after a period of strong hiring. The slowdown may signal that the economy is heading into a weak spring.
The Labor Department said Friday that the unemployment rate dipped to 7.6 per cent, the lowest in four years, from 7.7 per cent. But the rate fell only because more people stopped looking for work. People who are out of work are no longer counted as unemployed once they stop looking for a job.
The percentage of Americans working or looking for jobs fell to 63.3 per cent in March, the lowest such figure in nearly 34 years.
Stocks plummeted after the report. The Dow Jones industrial average dropped 157 points in morning trading. Broader indexes also declined.
Previous months revised higher
March's job gains were less than half the average of the previous six months, when the economy added an average of 196,000 jobs a month. The government said hiring was even stronger in January and February than previously estimated. January's job growth was revised up from 119,000 to 148,000. February's was revised from 236,000 to 268,000.
Several industries cut back sharply on hiring in March. Retailers cut 24,000 jobs after averaging 32,000 in the previous three months. Manufacturers cut 3,000 jobs after adding 19,000 the previous month. Financial services shed 2,000.
The Labor Department uses a survey of mostly large businesses and government agencies to determine how many jobs are added or lost each month. That's the survey that produced the gain of 88,000 jobs for March. It uses a separate survey of households to calculate the unemployment rate.
In March, the number of people either working or looking for work fell by nearly 500,000. It was sharpest such drop since December 2010. And the number of Americans who said they were employed dropped nearly 210,000.
Average hourly pay rose a penny, the smallest gain in five months. Average pay is just 1.8 per cent higher than a year earlier, trailing the pace of inflation, which rose 2 per cent in the past 12 months.
"This is not a good report through and through," Dan Greenhaus, chief economic strategist at brokerage firm BTIG, said in a note to clients.
Economists had hoped that the bigger pay increases in recent months would continue and boost Americans' ability to spend.
Some economists said they expect a slowdown this spring, though not as bad as in the past three years.
"We don't anticipate the slowdown becoming too severe, not when the housing recovery is firing on all cylinders, but it is a reminder that the U.S. is still unable to sustain what used to be just average rates of growth," said Paul Ashworth, an economist at Capital Economics.
The decline in the work force reflects several trends, economists say: Many of those out of work become discouraged and give up on their job hunts. And as the population ages, more people are retiring.
And Gary Burtless, senior fellow in economic studies at the Brookings Institution, notes that many Americans have likely stopped looking for work because their unemployment benefits have run out.
"If people aren't collecting benefits, they have one less reason to be out pounding the pavement looking for a job," Burtless says.
Most analysts think the economy strengthened from January through March, helped by the pickup in hiring, a sustained recovery in housing and steady consumer spending. Consumers stepped up purchases in February and January, even after Social Security taxes increased this year.
Fiscal cliff, sequestration cuts a factor
Still the higher taxes have reduced paychecks. And many economists say steep government spending cuts that began taking effect March 1 will slow growth in the spring and summer.
Nariman Behravesh, chief economist at IHS Global Insight, said employers may be slowing hiring in anticipation of the impact of the spending cuts.
As federal agencies and contractors cut back in coming months, Behravesh expects jobs growth to average 100,000 to 150,000 a month, down from an average 212,000 from December through February.
"The good news is that this is happening at a time when the private economy is gaining momentum," Behravesh said. He expects hiring to pick up after mid-year.
Mark Vitner, an economist at Wells Fargo Securities, thinks the economy expanded at a 3.2 per cent annual rate in the first quarter. But he forecasts that growth will slow to a 2 per cent annual pace in the current second quarter, and then rebound after the impact of the government spending cuts fades.