document: U.S. Jobless Rate Unexpectedly Drops to Two-Year Low in March April 2 -LRB- Bloomberg -RRB- - The unemployment rate in the U.S. unexpectedly fell to a two-year low of 8.8 percent in March as employers created more jobs than forecast , adding to evidence the labor-market recovery is gaining traction . Payrolls rose by 216,000 workers last month after a 194,000 gain the prior month , the Labor Department said yesterday in Washington . Economists projected a March increase of 190,000 , according to the median estimate in a Bloomberg News survey . A separate report showed manufacturing expanded at close to the fastest pace in seven years . `` It does look like things have turned the corner , '' Scott Brown , chief economist at Raymond James & Associates Inc. in St. Petersburg , said in an interview with Lisa Murphy on Bloomberg Television 's `` Fast Forward . '' `` We 're finally seeing small - and medium-sized companies hiring . '' Stocks climbed as the figures showed the world 's largest economy is weathering the highest energy prices in more than two years . Treasuries pared losses after William Dudley , president of the Federal Reserve Bank of New York , said the jobs data should n't change the central bank 's plans to buy $ 600 billion of government securities through June . `` I do n't see any reason to pull back from that yet , '' Dudley said in response to reporters ' questions about the Fed 's bond-buying program after a speech in San Juan , Puerto Rico . In his speech , he said the recovery is `` still tenuous '' and `` far from the mark '' of the central bank 's goals of full employment . Shares Climb The Standard & Poor 's 500 Index gained 0.5 percent to 1,332.41 at the 4 p.m. close in New York yesterday . Treasuries rose , with the yield on the 10-year note falling to 3.44 percent from 3.47 percent the previous day . Manufacturing expanded in March at about the same pace as February , the strongest month since May 2004 . The Tempe , Arizona-based Institute for Supply Management said its manufacturing index was 61.2 compared with 61.4 in February . Readings greater than 50 signal expansion . While companies stepped up hiring , earnings and hours stagnated , the Labor Department 's figures showed . Average hourly earnings for production workers rose 0.8 percent over the past six months , the smallest gain for such a period since 2004 . `` With the increased pace of hiring , this suggests that increasing numbers of returning jobless workers may be settling for lower wages than they had earned before the recession , '' David Resler , chief economist at Nomura Securities International Inc. in New York , said in a note to clients . Fed 's Effectiveness Bill Gross , manager of the world 's biggest bond fund at Pacific Investment Management Co. , said the gain in employment suggests the Fed 's bond purchases have been effective . `` Their objective obviously is to improve the economy and to create jobs but also to put a floor under the stock market , and we know that 's working , '' Gross said yesterday in a radio interview on `` Bloomberg Surveillance '' with Tom Keene . The Fed , after its latest policy meeting March 15 , pledged to continue its bond-purchase program in order to `` promote a stronger pace of economic recovery . '' Policy makers said the economy is on a `` firmer footing '' while acknowledging a rise in commodity prices . Record exports and gains in business and consumer spending are prompting companies like Chrysler Group LLC and Kohl 's Corp. to boost staff . Other manufacturing reports yesterday showed China 's factories accelerated for the first time in four months , while India 's grew for a 24th month . Chrysler , aiming for its first net profit since emerging from bankruptcy in 2009 , plans to hire 1,000 engineers and high - tech workers for its small and midsized vehicles . The Auburn Hills , Michigan-based company is also urging its dealers to hire more salesmen and service workers to help boost sales by 32 percent this year . Adding Staff `` Hiring additional personnel in preparation for the spring market is essential for success in 2011 , '' Peter Grady , vice president of Chrysler 's network development and fleet , said in a memo to dealers last month . Private hiring , which excludes government agencies , rose by 230,000 in March after a 240,000 increase in February , the biggest back-to-back gain since 2006 . The separate survey of households showed the size of the labor force increased by 160,000 in March and employment grew by 291,000 . That pushed the share of the population that is employed up to 58.5 percent from 58.4 percent a month earlier . Government payrolls decreased for a fifth straight month in March , reflecting cuts at the local level . Factory payrolls increased by 17,000 last month , while the construction industry shed jobs . Led by Services Employment at service-providers rose 185,000 in March , the most since May 2010 . Temporary-help services companies added 28,800 workers and retail employment increased by 17,700 . Economic growth accelerated to a 3.1 percent annual rate in the fourth quarter of 2010 as consumer spending climbed by the most in four years . Oil prices that closed at $ 107.94 yesterday on the New York Mercantile Exchange , the highest since September 2008 , may keep climbing should Middle East political turmoil continue unabated , raising the risk that consumer spending will slow . U.S. companies are still trying to gauge the effects of the March 11 earthquake in Japan and the subsequent nuclear crisis on international supply chains . Toyota Motor Corp. expects assembly interruptions that may affect North America plants . - With assistance from Tom Keene and Lisa Murphy in New York and Alex Kowalski in Washington . Editors : Carlos Torres , Vince Golle To contact the reporter on this story : Bob Willis in Washington at bwillis@bloomberg.net To contact the editor responsible for this story : Christopher Wellisz at cwellisz@bloomberg.net
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