U.S. unemployment drops to lowest rate since 2007

U.S. employers added just 98,000 jobs in March, the fewest in a year, but the unemployment rate fell to a nearly 10-year low of 4.5 percent, down from 4.7 percent in February.

The rate hasn't been that low since May 2007.

Last month's weakness in hiring may point to sluggishness in the economy, but unusual weather might also have been a factor. Job gains in January and February had averaged a robust 218,000, fueled partly by strong hiring in construction, which occurred because of unseasonably warm winter weather.

As a result, economists had expected a falloff in hiring in March. Still, the drop last month was worse than expected.

It its jobs report Friday, the government also revised down the job growth for January and February by a combined 38,000. And it reported that average hourly earnings rose 0.2 percent in March from February and have risen 2.7 percent over the past 12 months.

The unemployment rate fell because nearly a half-million more Americans reported finding jobs, the Labor Department said.

Last month, construction companies added just 6,000 jobs, the fewest in seven months. Retailers, suffering from the shift to online shopping, slashed 30,000 jobs. Education and health care services added the fewest jobs for that category in 15 months.

In the past three months, employers have added an average of 178,000 jobs, roughly the same as last year's solid pace.

"Job growth this year is running close to last year's pace and is running well ahead of what is needed to keep up with labor force growth," said Gus Faucher, chief economist at PNC Financial Services.

The report showed that large numbers of teenagers, women and Latinos found jobs last month. The unemployment rate for teens dropped to 13.7 percent from 15 percent.

The number of part-time workers who would prefer full-time jobs declined. As a result, an alternative gauge of unemployment, which includes those part-timers as well as people who have given up their job hunts, dropped to 8.9 percent. That is the lowest such rate in over nine years.

The economy appears to have slowed in the first three months of the year, though most economists expect a rebound in the current April-June quarter.

Consumer and business sentiment has soared since the November presidential election, but the increased optimism hasn't yet accelerated growth. Consumers actually slowed their spending in January and February, when adjusted for inflation. Any such pullback tends to exert a drag because consumers account for about 70 percent of the economy.

Businesses have been ordering more high-cost manufactured good since fall, a reflection of stepped-up investment. But those orders slipped in February and remain below levels of a year ago.

Still, some areas of the economy are humming: Developers are building more homes, with construction starts up 7.5 percent in January and February compared with a year earlier. And home sales reached their highest level in a decade in January before slipping a bit in February.

What's more, for the first time in years, overseas growth stands to boost the U.S. economy. Germany's factories enjoyed a surge in orders in February. The rest of Europe, as well as Japan, is reporting faster growth, and China is stabilizing after fears about its outsize debts roiled markets last year.

Many economists expect hiring to fall back eventually to last year's pace or even lower as the unemployment rate declines and companies struggle to fill jobs. Yet hiring could remain strong if more Americans come off the sidelines and start looking for work again. The proportion of Americans who are either working or looking for work remains far below pre-recession levels.