The U.S. unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began.
The economy added 216,000 jobs last month, the Labor Department said Friday. Factories, retailers, the education and health care sectors and professional and financial services all expanded payrolls. Those job gains offset layoffs by local governments.
Another month of brisk hiring provided the latest sign that the economy may be finally strengthening nearly two years after the recession ended.
Private employers, the backbone of the economy, drove the gains. They added more than 200,000 jobs for a second straight month. It was the first time that's happened since 2006 — more than a year before the recession started.
The unemployment rate dipped from 8.9 percent in February. The rate has fallen a full percentage point over the past four months. That's the sharpest drop since 1983.
"The U.S. labor market is finally making some serious progress," said Sal Guatieri, economist at BMO Capital Markets Economics.
Economists predict employers will add jobs at roughly the same pace for the rest of this year. That would generate about 2.5 million new positions. Still, that would make up for only a small portion of the 7.5 million jobs wiped out during the recession.
A big factor in the lower unemployment rate is that many people who stopped looking for jobs during the recession still haven't started looking for one. So they're not counted as unemployed. The proportion of people who either have a job or are looking for one is surprisingly low for this stage of the recovery.
If many out-of-work people start looking for work again, they will be counted as unemployed. So the unemployment rate could go up, even if the economy adds jobs.
Local governments, wrestling with budget shortfalls, cut 15,000 workers last month and are expected to keep shedding jobs. Home prices are falling amid weak sales and a record number of foreclosures. Higher food and gas prices are leaving consumers with less disposable income to spend on other goods and services.
Workers' paychecks were flat in March. Average hourly earnings held steady at $22.87, unchanged from February. Workers have little bargaining power to demand big pay raises because the job market is still healing slowly.
The number of unemployed people dipped to 13.5 million in March, still almost double since before the recession began in December 2007.
Including part-time workers who would rather be working full time, plus people who have given up looking altogether, the percentage of "underemployed" people dropped to 15.7 percent in March.
Professional and business services, including accountants, bookkeepers, engineers and computer designers, added 78,000 positions, the most since November. Of those, 29,000 were temporary positions.
Factories added 17,000 jobs in March, marking the fifth straight month of gains. Retailers added nearly 18,000 jobs, after cutting them in February. Financial services expanded payrolls by 6,000, following two straight months of cutbacks. Education and health services expanded employment by 45,000, leisure and hospitality added 37,000 jobs.
Aside from layoffs by local governments, other sectors eliminating jobs included construction, transportation and warehousing, and information services, such as telecommunications. State government hiring was flat, after four straight months of layoffs.