WASHINGTON (Reuters) - Employment grew solidly for a third straight month in February, a sign the economic recovery was strengthening and in less need of further monetary stimulus from the Federal Reserve.
Employers added 227,000 jobs to their payrolls last month, the Labor Department said on Friday, while the unemployment rate held at a three-year low of 8.3 percent even as people flooded back into the labor force to hunt for jobs.
Not only was job growth a bit stronger than the 210,000 economists polled by Reuters had expected, but the government said 61,000 more jobs were created in December and January than previously thought.
Nonfarm payrolls have now grown by more than 200,000 for three months in a row - bolstering President Barack Obama’s chances for re-election. Employment growth has averaged 245,000 a month over the last three months.
“It looks like the economy is starting the year with some positive news for consumers and households,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis.
“The trend is toward better jobs data with companies showing more conviction that the economy is finally gaining strength.”
Stocks opened modestly higher on the report, while prices for Treasury debt fell as traders dialed down the prospects for more bond buying by the Fed. The dollar rallied broadly.
“I think we’ll begin to ... debate about the Fed exiting its ultra-accommodative policy stance sooner than expected,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
A second report on Friday showed the trade deficit widened 4 percent on high oil prices and record imports, which will weigh on domestic growth.
Manufacturing, which in January recorded the largest jobs gain in a year, had another sturdy performance in February and there was also strong demand for temporary help, a potential harbinger of future permanent hiring.
Although the labor market is gaining some muscle, the pace of improvement remains too slow to do much to absorb the 23.5 million Americans who are either out of work or underemployed.
Fed Chairman Bernanke last week described the jobs market as “far from normal” and said continued improvement would require stronger demand for U.S. goods and services.
Still, he suggested the outlook would have to deteriorate for the central bank, which meets next week, to launch another round of bond buying to drive interest rates lower.
The employment report added to the list of data highlighting the economy’s underlying strength.
The data also provided a hopeful sign for the global recovery with growth slowing in China and the euro zone sliding into recession. The jobless rate in the 17-nation euro zone area rose to 10.7 percent in January, the highest since the euro started circulating in 2000.
In contrast, the unemployment rate has dropped 0.8 percentage point since August, providing some relief to Obama, who faces an election battle in which the economy has been center stage.
Economists predict the jobless rate could fall below 8 percent by the November election, even if the recent firming in the jobs market lures Americans who have given up the search for work back into the labor force.
The labor force participation rate - the percentage of working-age Americans either with a job or looking for one - rose to 63.9 percent from 63.7 percent in January, suggesting Americans are growing more optimistic on job prospects.
The increase in size of the workforce was the largest since April 2010.
White House economic adviser Alan Krueger said the report provided “further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression.”
Republicans were less forgiving.
“While there is some good news in this report, it is hard to celebrate while so many Americans remain out of work and those who do have a job haven’t seen a raise in years,” said Republican Representative Dave Camp, the chairman of the House of Representatives Ways and Means Committee.
While some parts of the jobs market have benefited from unseasonably warm winter weather, economists say a genuine improvement is under way, even though they expect a slight pull back in March.
Private companies again accounted for all the job gains in February, adding 233,000 positions. Government employment fell a modest 6,000, declining for a sixth straight month.
Manufacturers hired 31,000 new workers, with all the gains concentrated in the segment that produces long-lasting goods.
Auto companies, which have stepped up production, are taking on new workers and adding shifts and overtime to meet pent-up demand after production was disrupted early last year following the tsunami and earthquake in Japan.
Factory employees worked more hours last month, helping to lift the average hourly earnings for all workers by three cents in February.
Average hourly wages increased 1.9 percent in the 12 months through February, suggesting little wage inflation even though unit labor costs grew much more strongly than initially thought in the third and fourth quarters of 2011.
The overall workweek held steady at 34.5 hours - holding at the highest level since August 2008.
Outside manufacturing, construction payrolls fell 13,000, the first decline in four months. Temporary hiring, seen as a harbinger for permanent hiring, added 45,200 jobs in February after rising 32,100 the prior month.
Although hiring has quickened, the economy faces persistent long-term unemployment. In February, about 43 percent of the 12.8 million unemployed Americans had been out of work for more than six months.
Reporting By Lucia Mutikani; Editing by Neil Stempleman