Hiring in March could point to firming economy

American employers likely hired at a moderate pace in March, suggesting the economy is gathering momentum despite the onset of the across-the-board federal spending cuts.

Companies and governments probably added a net 200,000 workers to their payrolls last month, according to a Reuters survey of economists.

That would be below the 236,000 jobs created in February but well above what has passed for normal in recent years. Since the country emerged from a deep recession and payrolls began growing again in 2010, hiring has averaged just 159,000 per month.

"Labor markets appear to be improving," UBS economist Kevin Cummins said in a research note.

The Labor Department will release the March employment report on Friday at 8:30 a.m.

The improvement in the jobs market, which is not expected to lower the unemployment rate from 7.7 percent, could fuel more discussion at the Federal Reserve over whether the central bank should dial back a stimulus program under which it buys $85 billion in government and mortgage bonds every month. Some Fed officials have said the time for reducing stimulus could come soon.

However, it remains to be seen if the pace of job market healing will be sustained, a condition Fed Chairman Ben Bernanke has insisted on before he will support easing back on monetary support.

Bernanke has voiced concern that the spending cuts - which began in January and accelerated in March - could place substantial strain on the economy.

In addition, there has been little sign a January tax increase has dealt a major blow to U.S. families, and the employment report is expected to show some gains were driven by household demand.

JPMorgan, for example, reckons 40,000 new jobs were added last month in the construction sector, a product of what appears to be a growing recovery of the housing market. February was the best month for job creation in construction since 2007. Manufacturers also added jobs.

"We believe these trends carried over into March," JPMorgan economists said in a research note.

Manufacturing grew more slowly in March, but the analysts polled by Reuters nonetheless see employment in the sector rising by 10,000.

Another indicator of labor market health will come in the share of the population that is either employed or looking for work. The jobless rate has fallen a half percentage point since July, but some of this is due to workers' leaving the labor force, whether because they retired, went back to school or otherwise gave up the job hunt.

The labor force participation rate fell to 63.5 percent in February, matching a three-decade low; a stabilization of this indicator could point to more healing in the labor market.


It might be too soon to know if federal budget cuts in March are affecting employment in the broader economy.

It could take time for the cuts to reverberate through industries that sell goods and services to the government. Many analysts think the budget "sequester" - as it is known in Washington - will bite harder later in the spring.

Economists nonetheless think slow and steady job creation is adding momentum to consumer spending, which is the engine of the U.S. economy.

"Improving job and income prospects are offsetting a sizeable portion of the fiscal drag," said Joseph LaVorgna, an economist at Deutsche Bank in New York.

Average hourly earnings are expected to have risen 0.2 percent last month after increasing at the same rate in February. An increase in March would mark the fifth straight month of gains.

The length of the average workweek is expected to have held steady at 34.5 hours.

Since the 2007-09 recession ended, the economy has struggled to grow above a 2 percent annual pace. In the fourth quarter, output barely grew. But growth is widely seen rebounding in the first quarter before growing at around a 2.5 percent in the second half of the year.

Without sequestration of government spending, the economy would likely be growing at a faster pace. In March, government payrolls are expected to have dropped by about 9,000 last month after falling 10,000 in February.

(Reporting by Jason Lange; Editing by nSteve Orlofsky)