Hiring rose more than expected last month and the jobless rate unexpectedly dipped to a two-year low, the Labor Department said Friday, bolstering expectations that the economy can keep growing without another round of Federal Reserve stimulus.
Employers added 216,000 jobs in March, topping views for 185,000. The unemployment rate fell 0.1 point to 8.8%, down from 9.8% in November, according to a separate survey of households.
Faster hiring could fuel consumer spending and provide a floor for still-slumping home sales and prices. U.S. auto sales rose to a 13.1 million annual rate last month, led by double-digit gains at Ford (NYSE:F - News) and Chrysler.
Still, payrolls remain 7.25 million jobs below where they were before the recession. The average unemployment duration rose to a fresh record of 39 months.
Also, the labor force participation rate held at a 27-year low of 64.2% even though the work force expanded for the second straight month, suggesting that hiring is just strong enough to absorb new entrants.
"We're definitely making progress on the employment front. The not-so-good news is we still have a ways to go," said Nariman Behravesh, chief economist at IHS Global Insight.
The private sector added a better-than-expected 230,000 jobs last month, offsetting a drop by cash-strapped governments.
Meanwhile, the Institute for Supply Management said Friday that its manufacturing index dipped 0.2 point in March to 61.2, still far above the neutral 50 level. But the prices paid gauge jumped to the highest level since July 2008 as oil and other commodity costs rose.
Some hawkish Federal Reserve officials have called on the central bank to end its $600 billion Treasury buying program early, due to inflation fears. But many of their colleagues likely agree with New York Fed President William Dudley, who said Friday that the U.S. is still "very far away" from where policymakers want to be.
Still, the data signal that the economy is improving and can handle head winds from Japan's unfolding disaster, Europe's debt woes and unrest in Libya.
"A lot of these head winds will have a very small effect on U.S. growth," Behravesh said. "This recovery is self-sustaining now, and it doesn't require further stimulus to keep going."
So the Fed is expected to complete its second round of quantitative easing in June as scheduled, then stand pat. While the European Central Bank is poised to hike rates this week, the Fed is unlikely to follow suit until next year at the earliest.
Stocks rallied on the jobs report, though the gains faded markedly. The Nasdaq rose 0.3% and the S&P 500 0.5%.
U.S. crude prices topped $108 a barrel. Corn futures soared for a second straight day. Both hit their highest levels since 2008.
Fed chief Ben Bernanke says higher commodity prices will likely result in a "temporary and modest" hike in consumer prices .
Slack labor markets will stymie most firms from passing on higher costs, economists say. Hourly earnings were flat in March.
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