Jobless rate falls to 7.6%, just 88K new jobs

• Job growth of 88%2C000%3B median forecast of 190%2C000
• Other data also point to spring slowdown in economy
• Economy has slowed in past three springs

Employers added a disappointing 88,000 jobs in March after adding 268,000 jobs in February, confirming fears of a hiring slowdown that economists say could persist for several months. The number of new jobs is fewer than half what economists had forecast and the lowest since last June.

The unemployment rate fell to 7.6% from 7.7%, largely because 496,000 Americans stopped working or looking for work, thus leaving the labor force, the Labor Department said Friday in its monthly employment report. The portion of Americans in the labor force fell from 65.5% to 65.3% — lowest since 1979.

Futures trading on Wall Street in major indexes began sinking as soon as the report was released. And investors fled to the safety of U.S. Treasury bonds, where prices soared and yields plummeted. The yield on the 10-year U.S. Treasury note plunged to 1.68%, lowest since December.

A temporary lull in the job market has been anticipated because of across-the-board federal spending cuts that took effect March 1 and this year's payroll tax increase on Jan. 1 that could crimp consumer spending.

The economy and job growth have slowed in spring each of the past three years for various reasons, including the European financial crisis, the Japanese earthquake and budget battles in Washington. This report, along with several other weak economic reports this week, added to fears that the economy will stall again this spring.

In March, businesses added 95,000 jobs. Federal, state and local governments cut 7,000.

Job gains for January and February were revised up by a total 61,000. January's gains were revised to 148,000 from 119,000 and February's to 268,000 from 236,000.

There were a few somewhat encouraging signs in the surprisingly weak report. The average workweek edged up to 34.6 hours from 34.5 hours. Employers typically increase existing workers' hours before adding new staffers. And average hourly earnings rose 1 cent to $23.82.

And the number of temporary workers increased by 20,000. The addition of contingent workers also typically foreshadows stronger permanent hiring.

But Patrick O'Keefe, a former deputy assistant secretary at the Labor Department, says the rise in the workweek and number of temporary employees likely underscores growing reluctance by employers to commit to new full-time workers. They're concerned, he says, about the federal spending cuts as well as Europe's sluggish economy.

"This is a very disappointing report," says O'Keefe, director of economic research for Cohn Reznick, an accounting consulting firm.

One mildly positive sign: The underemployment rate — a wider barometer of joblessness that includes people who stopped looking for work and part-time workers who prefer full-time jobs, as well as the unemployed — fell to 13.8% from 14.3%.

And the number of Americans out of work at least six months fell from 4.8 million to 4.6 million. They still comprise nearly 40% of all the unemployed.

Professional and business services led job gains, with 51,000. Education and health services added 28,000, construction added 18,000 and leisure and hospitality, 17,000.

Retailers, however, cut 24,000 jobs. O'Keefe says that may reflect reduced consumer spending after Congress and the White House decided not to renew a payroll tax cut In January.

Some economists lowered their forecasts for the March employment numbers following this week's batch of weaker-than-expected reports.

The government said Thursday that the number of Americans filing jobless claims for the first time rose by 28,000 last week to a four-month high of 385,000. A separate survey by payroll processor ADP estimated that businesses added just 158,000 jobs in March, down sharply from the 200,000-plus average monthly gains since November.

Measures of manufacturing and service-sector activity last month also slipped. And March layoffs rose sharply vs. a year ago, according to outplacement firm Challenger, Gray & Christmas.