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The United States added far fewer jobs than expected in March -- 88,000 -- the slowest growth in nine months and a third of the pace in February, according to official data released Friday.
The Labor Department's highly anticipated monthly jobs and unemployment data, a key indicator of the health of the US economy, came in well below estimates and disappointed financial markets, which fell on the news.
The unemployment rate dipped to 7.6 percent from 7.7 percent in February, but only because nearly half a million people dropped out of the workforce.
The March jobless rate was the lowest since December 2008. Most analysts had expected it would hold unchanged at 7.7 percent.
But the dismal pace of jobs growth, the weakest since June, surprised analysts, whose average forecast was for 192,000 jobs.
The figures gave the first look at the labor market since the federal government's $85 billion a month "sequester" spending cuts kicked in on March 1.
Drastic spending cuts through September -- a result of political gridlock in Washington on budget deficit reduction -- were expected to shave at least a half percentage point off economic growth.
The Congressional Budget Office has estimated the sequestration will reduce employment by 750,000 jobs by the end of the year.
"The trend in payrolls is consistent with our expectation that employment growth will slow somewhat in coming months as the large, and increasing, fiscal drag is absorbed," said Barclays analyst Michael Gapen.
Job growth was revised higher in the prior two months. The February gain was revised up to 268,000 from an initial estimate of 236,000, and the January gain was lifted to 148,000 from 119,000.
Job gains on average totaled 169,000 per month in the past 12 months.
President Barack Obama's chief economic adviser urged Democratic and Republican lawmakers to reach a budget compromise and end the government job cuts and furloughs that will have a knoc-on effect on the private sector.
"While the recovery was gaining traction before sequestration took effect, these arbitrary and unnecessary cuts to government services will be a headwind in the months to come," Alan Krueger said.
The leader of the opposition Republicans in Congress, John Boehner, speaker of the House of Representatives, blamed Obama's policies, which he said "continue to make it harder for Americans to find work."
"One of the best things President Obama can do is follow the House and outline a balanced budget next week -- one that includes entitlement reforms that are not conditional on enactment of more tax increases, which will suppress growth instead of encourage it," Boehner said.
In March, the private sector added only 95,000 jobs, down from 254,000 in February. Retail trade shed 24,000 jobs and manufacturing lost 3,00.
Federal, state and local government employment dropped by 7,000 jobs.
The total number of unemployed persons was little changed at 11.7 million.
But the participation rate, a measure of the number of people employed or actively seeking work, fell by 0.2 to 63.3 percent, its weakest level since 1979.
The economy, which grew a mere 0.4 percent in the 2012 fourth quarter, appeared too slack to generate significant jobs growth.
"The weak March is particularly discouraging given the inevitable impact on the economy from the sequester," said Sophia Koropeckyj of Moody's Analytics.
"However, the recovery is on much better footing this year than in the last few springs and the recovery in the housing market will do much to support growth," she said.
The analyst predicted housing-related employment directly and indirectly would account for two-thirds of all private-sector job gains during the next three years.