Job creation heralds stronger recovery

WASHINGTON (Reuters) - Employers added more than 200,000 workers to their payrolls for a third straight month in February, a sign the economy was strengthening and in less need of further monetary stimulus from the Federal Reserve.

The report from the Labor Department on Friday, which showed nonfarm payrolls increased 227,000 last month, also bolstered President Barack Obama's chances for re-election.

The jobless rate held at a three-year low of 8.3 percent even as people flooded back into the labor force to hunt for work, and 61,000 more jobs were created in December and January than previously thought.

"The economy, while nowhere near fully healed, has enough momentum to move forward on its own and seems to be gaining strength," said Megan Ellis, an economist at John Hancock Financial Services in Boston. "For now, the Fed has little to do except sit, wait and hope."

Stocks on Wall Street rose on the data, while prices for Treasury debt fell as traders dialed down the prospects for more bond buying by the central bank. The dollar raced to a near 11-month high against the yen.

Fed Chairman Ben Bernanke last week described the jobs market as "far from normal" and said continued improvement would require stronger demand for 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 monetary easing to drive interest rates lower.

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. A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, dropped to a three-year low of 14.9 percent.

Economists are perplexed at the relative strength of the jobs market, given still-sluggish economic growth.

Growth is expected to slow this quarter from the fourth quarter's 3 percent annual pace with high gasoline prices curbing spending and a recession in Europe weighing on exports.

Consumer spending has been flat for three straight months, and a report on Friday showed the trade deficit hit its widest point in three years on high oil prices and record imports, leading some economists to scale back growth forecasts.

MANUFACTURING DELIVERS

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.

The unemployment rate has dropped 0.8 percentage point since August, providing relief to Obama, who faces an election battle in which the economy is at center stage.

Economists predict the jobless rate could fall below 8 percent by the time voters go to the polls in November.

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. Republican presidential hopeful Mitt Romney, at campaign event in Jackson, Mississippi, said that Obama had promised 37 months ago that he would push the jobless rate below 8 percent with government stimulus measures.

"It has not been below 8 percent since. This president has not succeeded. This president has failed and that's the reason we're going to get rid of him in 2012," Romney said.

Obama was expected to address the data in remarks at 12:30 p.m. (1730 GMT).

GENUINE RECOVERY UNDERWAY

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 average hourly earnings for all workers by three cents. Over the past 12 months, hourly wages have increased 1.9 percent - a figure that has changed little over the past year.

Wage growth continues to trail inflation, with gasoline prices up 49 cents since January.

The length of the average workweek held steady at 34.5 hours - the highest level since August 2008.

Outside manufacturing, construction payrolls fell 13,000, the first decline in four months. Temporary employment rose by 45,200 in February after climbing 32,100 in January.

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.

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)