WASHINGTON – Companies added more workers in February than in any month in almost a year — a turning point for the economy that finally pushed the unemployment rate below 9 percent. Economists say the stronger hiring should endure all year.
The 222,000 jobs the private sector created more than offset layoffs by financially squeezed state and local governments. They slashed 30,000 jobs, the most since November.
The unemployment rate sank to 8.9 percent, the lowest since April 2009. The rate has now fallen almost a full percentage point in just three months — the sharpest drop in a generation.
Hiring last month was broad — factories, trucking companies, health care providers, construction firms, hotels and restaurants all added jobs.
"Bottom line: The labor market is turning the corner," said Michael Darda, chief economist at MKM Partners, an economic research firm.
The figures suggest the economy has entered a healthier phase typical of what economists call a virtuous cycle: Americans are spending more, which raises corporate profits, which leads to hiring and more spending and growth.
At UPS, for example, revenue and profits have both risen because of the growing economy. The company has nearly 250 job openings for salaried positions, up from 100 this time last year, and is hiring hourly workers at 150 locations.
Normally, the company just rehires its temporary employees from the holidays if it needs them. But this year, "we've already hired a lot of those folks back, and we still have more needs," said Matt Lavery, UPS' head of recruiting.
During the recession, the cycle was more vicious than virtuous: Waves of layoffs suppressed consumer spending, which lowered corporate profits and triggered more job cuts.
On Wall Street, another spike in oil prices rattled investors and overshadowed the good news on hiring. The Dow Jones industrial average fell more than 150 points, one day after posting its biggest gain of 2011.
Other forces are still working against the economic recovery. State and local governments are expected to keep shedding jobs, and inflation and higher gas prices resulting from the Middle East unrest are threats.
Still, economists now think private companies will feel comfortable enough to add 200,000 jobs a month through the rest of this year. That would be an improvement from the average of 150,000 jobs created over the past three months.
It takes about 125,000 new jobs a month just to keep up with population growth and hold the unemployment rate stable. It could take up to 300,000 to reduce the unemployment rate significantly, economists say.
Stronger job growth should put the economy on track to grow at a roughly 4 percent annual rate in the first three months of this year, economists said. That would be stronger than the 2.8 percent pace in the final three months of 2010.
Job creation has been the missing ingredient in the economic recovery. Manufacturers have created 190,000 jobs in the past year, the most since 1998. The economy's service sector, which employs most of the work force, is expanding at the fastest pace in more than five years. Shoppers are spending more. U.S. exporters are selling more abroad. Stock prices have surged.
"The last piston in the economic engine has begun to fire, pointing to sustained economic growth," said economist Sung Won Sohn at California State University.
That said, 8.9 percent unemployment is high by historical standards. Economists predict it will take four or five years for it to drop to something more normal, near 6 percent. And as more people start looking for jobs later this year, the rate could rise. Government surveys of households don't count people without jobs as unemployed unless they say they're looking for one.
But for the moment, the jobs picture looks brighter than most people would have anticipated three months ago. The issue will be a key factor in President Barack Obama's expected re-election bid next year.
"Our economy's now added 1.5 million private-sector jobs over the last year, and that's progress," the president said at a stop in Miami where he talked about competitiveness in the global economy. "But we need to keep building on that momentum."
The report would have been even brighter if state and local governments had added jobs, as they normally do in economic recoveries, instead of cutting them. Historically, states and cities contribute 10 to 15 percent of the jobs created during recoveries.
Factoring in the government layoffs, the economy added 192,000 jobs last month. January's job gains were revised upward, to 63,000. Some of February's increase was due to people returning to payrolls after dropping off because of severe weather earlier this winter.
Still, the job gains were widespread. Factories added 33,000, the fourth month in a row of gains. Education and health care added 40,000, professional and business services such as engineering, architecture and computer design added 47,000, leisure and hospitality 21,000, and transportation and warehousing 22,000.
Federal Reserve Chairman Ben Bernanke told Congress this week that the Fed would start pulling back the money it pumped into the economy once the recovery firmly takes hold. The Fed could also raise interest rates from their record lows, though most economists think that won't happen for at least another year.
The number of unemployed people in the United States dipped to 13.7 million, still nearly double the number 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, roughly 25 million are "underemployed." That's 15.9 percent of the work force, the smallest share in almost two years.
The number of "long-term" unemployed, or people out of work six months or more, sank by 217,000 to just under 6 million.
Workers' paychecks were mostly flat in February. Average hourly earnings rose to $22.87, up 1 cent from January. Workers have little bargaining power to demand big pay raises because the job market is still healing slowly.
AP Economics Writers Christopher S. Rugaber and Paul Wiseman in Washington contributed to this report.
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