The nation's unemployment rate declined from 7.7 percent to 7.6 percent in March as more people stopped looking for work and businesses added another 88,000 jobs, the Labor Department reported.
The weak job growth reflected the loss of 12,000 U.S. Postal Service positions and a government job freeze as an estimated $85 billion of across-the-board budget cuts went into effect March 1.
Private businesses offset the government layoffs by creating 95,000 jobs, and in January and February they created 62,000 more jobs than previously estimated.
Job growth during March was concentrated in professional and business services and in health care, areas that consistently have shown strength throughout the nearly four-year recovery. Construction jobs continued their recent growth spurt, rising by 18,000 thanks to the revival in the housing market.
Chris Williamson, economist at Markit.com, called the report a "massive disappointment" because Wall Street forecasters had been expecting a job gain closer to 200,000 in March. Markets are likely to tumble on the news, released Friday.
But the greater job gains in previous months were encouraging, Mr. Williamson said, providing for a total of 504,000 new jobs in the first quarter — a "healthy" rate of growth.
He said uncertainty about federal budget cuts may have curbed private job growth in March and likely will raise talk about the possibility of another spring slowdown in the economy resembling the one seen last year.
The decline in unemployment reflected both the steady growth of jobs and the exit of nearly a half-million workers from the labor force. People leave the labor force for reasons such as returning to school or retiring, but also by those who may have become discouraged and stopped looking for work.
The share of the population participating in the labor force, at 63.3 percent, was the lowest since 1978.
Average wages were nearly unchanged at $23.82 an hour — likely reflecting the freeze on government salaries and furloughs that are cutting take-home pay for thousands of government workers.
Despite the furloughs, the average workweek for all workers rose by 0.1 hour to 34.6 hours during the month.
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