WASHINGTON, DC -- A second straight month of solid job growth suggests the labor market is stabilizing, although employers have yet to start hiring at a clip consistent with rapid expansion.
Employers added 192,000 jobs in March, the U.S. Labor Department said Friday, shy of the roughly 200,000 non-farm payroll gains forecasters had expected for the month. The nation's unemployment rate stayed level at 6.7 percent.
Job growth over the previous two months was also slightly stronger than previously estimated. Employers added 144,000 jobs in January, up from the government's first read of 129,000, and 197,000 in February, up from 175,000.
The pace of job-creation slowed sharply in December and January, reviving fears that the economy was headed for a slump. But hiring accelerated last month, supporting the view that the preceding slide was due to the unseasonably cold weather that affected much of the U.S. this winter.
Federal Reserve Chair Janet Yellen said last month that the labor market is recovering, while conceding that "much remains to be done" to boost job growth. The central bank expects unemployment to fall to between 6.1 percent and 6.3 percent by year-end.Most private economists agree the economy is gaining strength, with forecasters predicting growth of around 3 percent for the year, compared with 1.9 percent in 2013.
Goldman Sachs (GS) analyst Jari Stehn said in a research note that several factors are combining with the onset of warmer weather to propel growth. Perhaps most important, the Fed is pledging to keep interest rates low, making it cheaper for consumers and businesses to borrow money. Capital spending, which slowed dramatically in early 2013, also is picking up, a sign that companies feel more confident about their business prospects.
Owners of small and midsize businesses, which account for the lion's share of jobs in the U.S., also appear to be more optimistic. About 20 percent of these enterprises plan to hire full-time workers over the next six months, the highest level in two years, according to PNC Financial Services Group. Stuart Hoffman, chief economist with the bank, thinks this year could be the strongest for the labor market since before the financial crisis crippled the economy in 2008.
With the economy seemingly regaining momentum, investors will now look for signs of sustained growth over the rest of the year.
"If we don't continue getting incrementally better economic data in the next three months and get back to where we were last summer, then we could see that long-awaited 10 percent pullback on stocks," said John Canally, an economist and investment strategist with broker-dealer LPL Financial. "Everyone is looking for that snapback on the weather, and if we don't get it that's a big risk."
"While we've made tremendous progress coming out of the recession, there are still a lot of things that need to happen for us to feel like we're back to where we were before," he said.
The biggest missing element in the recovery to date: higher pay. With demand in the economy remaining soft and a large pool of unemployed workers, employers are under little pressure to hike wages.
"Labor compensation has increased an average of only a little more than 2 percent per year since the recession, which is very low by historical standards," Yellen said in a speech this week in Chicago.
Another sign of persistent slack in the economy is that significantly fewer people today are willing to quit their jobs than before the recession. That suggests workers are less confident about being able to find another job and that employers aren't actively trying to hire people away from competitors.
Still, with the economy finding its footing, some forecasters expect a significant jump in worker pay this year. Aneta Markowska, chief U.S. economist with Societe Generale, estimates that wage growth will top 3 percent by year-end.