By Timothy R. Homan April 3 (Bloomberg) -- Employment in March grew by the most in three years, representing a turning point for the labor market that will help broaden the U.S. economy as it recovers from the deepest recession in seven decades. Payrolls rose by 162,000 workers, the third gain in the past five months and the most since March 2007, figures from the Labor Department showed yesterday in Washington. The increase included 48,000 temporary workers hired by the government to conduct the census. Unemployment was 9.7 percent for a third month. Manufacturers, health-care companies, temporary-help service providers and warehouses were among those adding jobs in a sign the expansion is becoming more entrenched. The jobless rate was unchanged even after Americans who had previously dropped out of the workforce decided to resume the job search, pointing to growing confidence that the world’s largest economy will continue to grow. “The labor market has turned,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who predicted a job gain of 177,000. “We’ll see steady hiring in coming months. There is momentum in the recovery.” Caterpillar Inc. is among companies adding staff, indicating the economic recovery that began in the second half of 2009 is starting to produce the jobs needed to lift consumer spending and sustain the expansion. The unemployment rate may be slow to recede as more people enter the job market, giving the Federal Reserve scope to hold its benchmark interest rate near zero in coming months. It’s Progress “We have some more work to do, but I think the economy is definitely getting stronger,” Treasury Secretary Timothy F. Geithner, 48, said in an interview yesterday with Bloomberg Television in New York. “We’ve made a lot of progress, we’ve got some work to do still and it’s going to take some time to heal the damage.” Payrolls were forecast to increase by 184,000, according to the median estimate of 83 economists surveyed by Bloomberg News. Estimates ranged from a decline of 40,000 to a gain of 360,000. The jobless rate was projected to hold at 9.7 percent. Treasury securities dropped after the increase in employment showed the expansion was becoming self-sustaining. The yield on the benchmark 10-year note climbed to 3.94 percent yesterday in New York, the highest since June. The stock market was closed in observance of Good Friday. Weather Rebound Part of the payroll gain last month likely reflected a rebound from the February blizzards that set seasonal snowfall records in cities including Washington and Philadelphia, shuttering some businesses during the week of the government survey. Any hiring that would have taken place that week is figured into the March job count instead. Hiring at the Census Bureau for the population count may have the biggest impact on payroll figures in April through June, when the bulk of the additions will take place. The program will then subtract from the job count the following months as employees are dismissed after the work is done. For that reason, economists will focus on the employment figures excluding the government. By that measure, job prospects are brightening. Private payrolls increased by 123,000 in March, the third consecutive increase and the biggest since May 2007. Employment at government agencies climbed by 39,000 workers, reflecting the increase in census staff. Budget-constrained state and local governments reduced headcount last month. Private Employment “The federal government didn’t hire nearly as many Census workers as thought,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said in an e-mail to clients. “It was the private sector that stepped up to the plate. The growth was broad-based as well.” Manufacturers increased staff for a third month, adding to evidence factories are at the forefront of the recovery. Construction companies, which may have been most influenced by the weather, boosted payrolls by 15,000 workers, the first increase since June 2007. Leggett & Platt Inc., a 127-year-old manufacturer based in Carthage, Missouri, has hired a few hundred employees this year to meet rising demand for its car-seat parts and home-furniture components, according to Chief Executive Officer David Haffner. “Things are better,” Haffner, 57, said in a March 16 interview. “We are reluctant to get too optimistic too quickly, but things are relatively better.” Warehouses and Hospitals Transportation and warehousing companies added 7,800 jobs, the most since September 2007, and providers of health care and social services payrolls increased 37,000 in March, the biggest gain since April 2008. Employment of temporary workers, which are considered a harbinger of permanent hiring, climbed in March for a sixth consecutive month. Their share in the payroll count is diminishing, showing companies are becoming more optimistic, said Christopher Low, chief economist at FTN Financial in New York. “The quality of jobs is improving, and it is a clear sign of improving CEO confidence,” Low said in a note to clients. “Cautious CEOs hire temps, optimists make permanent hires.” Not all the data in the employment report was positive. The figures showed average earnings per hour dropped last month and the number of people working part-time because they couldn’t find full-time work increased. The so-called underemployment rate -- which includes the part-timers and people who want work but have given up looking - - increased to 16.9 percent from 16.8 percent. The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose to a record 44.1 percent of all jobless. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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