It was only one month, but what a month it was. After a string of disappointing employment reports, the Labor Department reported Friday that the economy added 308,000 jobs in March, the best performance in four years and far exceeding the 100,000 that analysts had been projecting. The news got even better as the department revised data from earlier this year, showing that the economy added 87,000 more than previously reported.
Stock prices rose sharply and bonds fell on the report, which appeared to confirm at last that the long jobless phase of the recovery is over and bolstered President Bush’s ability to defend his economic program on the campaign trail.
Analysts were cautious, however, noting that the the economy has a long way to go to make up for the 2 million jobs that have been lost over the past three years.
“This is, to some extent, what we have been waiting for, but it is is too early to celebrate,” said Sung Won Sohn, chief economist for Wells Fargo. Even with the so-called “spring surprise” of the March numbers, the economy has added only 108,000 jobs a month on average over the past seven months, far short of the 150,000 economists say are needed to keep up with the nation’s expanding work force.
He and other analysts said the Federal Reserve will want to see several more months of strong job creation before even considering raising short-term interest rates from their current historically low levels. Nevertheless bond prices plummeted, sending the yield on the benchmark 10-year bond up about a quarter of a percentage point, likely meaning a comparable increase in long-term mortgage rates.
The Dow Jones industrial average, up more than 100 points early in the session, settled back later and was up 67 points, or 0.7 percent late in the day.
The difficult job situation was underscored by the unemployment rate, which ticked up to 5.7 percent from 5.6 percent, partly because formerly discouraged workers are re-entering the labor force to look for work.
“We should really refrain from drawing significant conclusions based on a month or two of data,” said Sohn. “The fundamental factors which have made businesses cautious about hiring still remain.”
Nevertheless for the day, at least, the advantage belonged to Republicans who are hoping that strong and steady job growth will defuse what has been one of the most powerful campaign issues for presumed Democratic nominee John Kerry.
“The economy is growing and people are finding jobs,” Bush told a gathering at a community college in West Virginia, considered one of the battleground states in the fall election.. “This economy is strong. It is getting stronger.”
Kerry, in a statement issued by his campaign, called the report “welcome news” but said the nation still needs a new economy strategy to revitalize the manufacturing sector, which has been hardest hit in the as he has proposed.
“After three years of punishing job losses, the one-month job creation announced today is welcome news for America’s workers. I hope it continues,” said the statement from Kerry, who was recuperating from shoulder surgery. “But for too many families, living through the worst job recovery since the Great Depression has been, and continues to be, far too painful.”
Ethan Harris, chief U.S. economist for Lehman Bros., said the report "certainly helps Bush a lot," but he and others called the strong result only a partial make-up after four straight months of disappointing data.
Harris projected monthly growth of about 150,000 jobs over the next several months, rising to 200,000 by the end of the year. That would be slow enough to keep the Fed on hold until 2005, he figures.
In addition to the rising jobless rate, there were other somewhat troubling signs in Friday’s report.
The average workweek fell slightly to 33.7 hours, so that even though more people were working, fewer total hours were put in.
“This is puzzling since typically we see a large lengthening in the workweek preceding a rise in employment. We did not see that prior, and now the workweek pulled back on the month,” Merrill Lynch chief North American economist David Rosenberg said in a research note.
But Steven Wieting, a senior economist at Citigroup, said the economy appears to be making the transition from a jobless recovery to a “very normal cyclical type labor recovery.”
“There is no promise here that we would heal labor markets overnight, but the trends look pretty favorable,” he said.
Hourly wages were up just 0.1 percent in the month and have risen just 1.8 percent over the past year and so are just barely keeping up with inflation. Nearly 24 percent of the nation’s 8.3 million unemployed workers reported they have been looking for work for mote than six months, the highest rate of long-term unemployed in more than 20 years.
“We still have a way to go to absorb all the excess labor supply we have,” said Jared Bernstein, senior economist of the liberal Economic Policy Institute. But he added: “If this month’s trend continues we will certainly be on track to achieve that goal.”
Employment gains were widespread across industries and were especially high in construction, which increased by 71,000 workers after a weather-related decline in February. Retail employment rose by 47,000, professional and business services by 42,000 and health care by 35,000.
Manufacturing employment was unchanged, marking the first month since July 2000 that the nation’s manufacturing work force has not declined.