Job growth lifts outlook on economy

The nation's job-creation engine revved up last month and pushed the unemployment rate to its lowest level in two years, spreading optimism that the economic recovery is firmly in place and giving President Obama a political boost.

The economy lured back unemployed Americans who had given up hope of getting another paycheck as increases across nearly all sectors led to 216,000 additional jobs, the Labor Department said.

The unemployment rate ticked down to 8.8% — a full percentage point lower than in November and the sharpest four-month drop in 28 years.

Obama, trying to fend off a Republican push for deep budget cuts that administration officials warn could derail the recovery, said Friday that the economy was showing "signs of real strength." But he cautioned that millions of Americans still are out of work and that "we have to keep the momentum going."

The improvement bettered economists' predictions of about 200,000 new jobs and led forecasters to say that strong job growth appeared to have taken hold.

Chris Rupkey, chief financial economist for the Bank of Tokyo-Mitsubishi in New York, said there was "powerful forward momentum" in the jobs market, which should help buffet the headwind on the economy from rising gasoline prices.

That price rise, as well as uncertainty over the Middle East and debt-burdened economies in Europe, might yet cause the economy to slow again.

But the favorable jobs report had an immediate effect on Wall Street, where the Dow Jones industrial average rose Friday to nearly 12,377, and on the political scene, where Republicans could find it difficult to push their conservative agenda in Congress.

Republicans have said that employers aren't hiring because of overregulation, overspending and the new healthcare law, and that the economic recovery requires a change of direction. As businesses start hiring again, that argument weakens.

Republicans also could find it tougher to push for deep budget cuts as public-sector job losses continue to be one of the few major drags on employment.

The GOP won big in elections last fall at a time when some economists predicted unemployment might hit double digits this year. Amid worries about the economy, Obama's reelection prospects dimmed.

But his standing in opinion polls has improved. And partly because of continued economic recovery, national polls show his reelection prospects now are as good or better after a little more than two years in office than Bill Clinton's or George W. Bush's, both of whom won second terms.

At this point, Obama's presidency is tracking closer to that of Ronald Reagan, who rode an economic rebound to victory, than to Jimmy Carter, who was bounced after one term because of economic woes.

"Reagan's rise from a pretty unfavorable position…was built on a dramatic improvement in jobs numbers in '83 and '84," said Carroll Doherty, associate director of the nonpartisan Pew Research Center.

During that two-year period, the unemployment rate fell from 10.4% to 7.2%. The recent drop in the unemployment rate from 9.8% in November is the best since then.

House Majority Leader Eric Cantor (R-Va.) downplayed the job growth, describing it as an "uptick." While acknowledging it was good news, he said the still-high unemployment showed Republicans "need to continue our efforts in Washington to foster pro-growth policies that will help businesses small and large to innovate and expand."

White House officials were delighted by the new numbers, which they said surpassed their own internal projections.

"Obviously, things can go wrong, but this continues to be a very solid trend that we've seen over the last year," said Austan Goolsbee, chairman of the Council of Economic Advisors. "Yes, it was a deep hole, but we're growing our way out of that hole."

Optimism also has spread to unemployed workers, such as 37-year-old Air Force veteran Matthew Mabry of Bakersfield. On Thursday, he signed up for job-search help from Jewish Vocational Services.

"During the summer, I was in a funk," he said. "I didn't look for jobs."

But after landing a seasonal position at a Target warehouse during the holidays, Mabry said he's ready to start seriously looking for a full-time job.

Nelson Hyde Clark, 50, of San Francisco, who was laid off from his job as a landscaping supply salesman in February 2008, said he has started posting ads on Craigslist again looking for work.

The same goes forBarbara Deschaine, 55, of Agua Dulce, a licensed massage therapist and gemologist, who said she has been limited to "odds and ends" jobs for two years.

They're not alone. The number of so-called discouraged workers — those who haven't actively looked for a job for at least a month — dropped to 921,000 last month, down sharply from a high of 1.3 million in December, the Labor Department said.

The improvement in the job market was led by growth in business and professional services, with 78,000 new jobs. Healthcare, manufacturing, mining, and the leisure and hospitality industries also saw significant growth.

Overall, the private sector added 230,000 jobs. But local governments continued to struggle, shedding 14,000 jobs in March. That still was a major improvement over the 46,000 government jobs lost in February.

Friday's unemployment report comes on the heels of recent good economic news. But several potential trouble spots remain, including rising energy prices caused by unrest in the Middle East and North Africa.

Prices increased in February for the third straight month, with energy costs the main driver.

Overall, consumer prices increased 2.1% in the 12 months that ended in February, the most recent data available.

And economists noted that while the jobs drought is over, there's a long way to go to make up for the approximately 8.7 million jobs lost in 2008 and 2009. More than 13.5 million Americans remained out of work in March.

"It is sort of the tale of two cities," said Christine Owens, executive director of the National Employment Law Project. "Finally, job growth seems to have set in. Employers are adding jobs. Some people are coming back into the labor market…but for the long-term unemployed, it continues to be very difficult."

The long-term unemployed, defined as people out of work for at least 27 weeks, increased in March to 45.5% of the jobless from 43.9% in February, the Labor Department said.

That's near the historic high of 45.6% last May, and nearly double the rate of previous recessions, Owens said.

Those roughly 6.1 million people face a stigma from their long time without work when they seek a new job, she said.

jim.puzzanghera@latimes.com

alana.semuels@latimes.com

paul.west@latimes.com

Times staff writer Peter Nicholas contributed to this report.

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