Unemployment falls to 7.7 percent, as U.S. adds 236,000 jobs

A burst of hiring last month added 236,000 U.S. jobs and reduced the unemployment rate to 7.7 percent, down from 7.9 percent in January. The robust gain suggested that the economy can strengthen further despite higher taxes and government spending cuts.

However, there was some negative news to cloud the optimism.

The February jobs report issued Friday provided encouraging details: The unemployment rate is at its lowest level in four years. Job growth has averaged more than 200,000 a month since November. Wages rose slightly. And the job gains were broad-based, led by the most construction hiring in six years.

The unemployment rate had been stuck at 7.8 percent or above since September. The rate declined last month because the number of unemployed fell 300,000, to just over 12 million, the fewest since December 2008.

More than half the decline occurred because 170,000 of the unemployed found jobs. However, an additional 130,000 stopped looking for work, and people who aren't looking for jobs aren't counted as unemployed.

The unemployment rate is calculated from a survey of households. The job gains are derived from a separate survey of employers.

Employers did add slightly fewer jobs in January than the government had first estimated. Job gains were lowered to 119,000 from an initially estimated 157,000. Still, December hiring was a little stronger than first thought, with 219,000 jobs added instead of 196,000.

 “The good news was that preliminary job-creation numbers topped 236,000 for the month,” said Mike Hicks, director of the Center for Business and Economic Research at Ball State University, in a written statement.  “This is about half the rate we would require to absorb those unemployed in the Great Recession by the end of the decade."

“Bad news was just as thick in the report," Hicks continued. "Earlier employment estimates for December and January were revised for a net loss of 15,000 and more than 130,000 more workers left the labor force in February, driving our labor force participation rates to levels not seen in over 30 years.”

Robust auto sales and a steady housing recovery are spurring more hiring, which could trigger more consumer spending and stronger economic growth. The construction industry added 48,000 in February; it's added a solid 151,000 since September. Manufacturing gained 14,000 jobs last month and 39,000 since November.

Retailers added 24,000 jobs, a sign that they anticipate healthy consumer spending in the coming months. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.

The economy is also benefiting from the Federal Reserve's drive to keep interest rates at record lows. Lower borrowing rates have made it easier for Americans to buy homes and cars and for companies to expand.

The Fed has said it plans to keep the benchmark rate it controls near zero at least until the unemployment rate has fallen to 6.5 percent, as long as the inflation outlook remains mild.

Friday's jobs report isn't expected to move up the Fed's timetable for any rate increase.

"This may not yet be the substantial improvement in the labor market outlook that the Fed is looking for, but it's moving in the right direction," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven't caused Americans to sharply cut back on spending.

Across-the-board government spending cuts also kicked in March 1 after the White House and Congress failed to reach a deal to avoid them. Those cuts will likely lead to furloughs and layoffs in coming weeks.

The impact of the tax hikes is partly being offset by higher pay: Hourly wages rose 4 cents, to $23.82 last month. Wages have risen 2.1 percent over the past year, slightly ahead of inflation.

Hicks, the economist, said the slight increase should be expected because employees, on average, are working longer hours.

A big source of strength has also been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.

Home prices rose by the most in more than six years in the 12 months that ended in January. Higher prices tend to make homeowners feel wealthier and more likely to spend.