"There might be a modest surprise in this for the markets, but they're pretty much right on the money," PNC Financial economist Stuart Hoffman said. "The unemployment rate dipping to 8.8 percent might be a pleasant surprise, because most of us had it unchanged."
Though a significant improvement from the middling job growth last fall, Friday's numbers still fall short of levels needed to bring down unemployment over the long term. Because of population growth, it takes at least 150,000 jobs added per month, and more than 200,000 per month over a sustained period, to bring the job market closer to normal.
The numbers will likely add to grumbling by several top Federal Reserve officials, including presidents of the regional Fed banks in St. Louis, Philadelphia, and Richmond, about an early end to quantitative easing -- an unlikely scenario, since the program is supposed to end in June and Fed Chairman Ben Bernanke wants to see it through.
Nomura chief economist David Resler said the jobs numbers will not affect the Fed's execution of QE2.
"Certainly they're not going to be reversing anything before the June endpoint," Resler said. He also expressed skepticism that the improving job numbers could lead Fed to start raising the Fed funds rate -- now virtually at zero -- sooner rather than later.
"Our view is that the funds rate won't need to be raised until sometime in 2013 -- the underlying inflation pressures aren't there," Resler said, noting that hourly earnings have only risen by 1.7 percent over the last 12 months. That's less than headline inflation and only slightly higher than core inflation.
"Part of the reason employment improved [is] people who were holding out for the wages they were earning are coming back in for lower wages," Resler said. "That's not an inflationary environment, it's a deflationary environment."
The ongoing decline in the official unemployment rate doesn't factor in the millions of people who have simply left the labor force and aren't included in the Labor Department's calculation of unemployment.
There were 921,000 discouraged workers in March -- roughly the same amount as a year ago. But as demand for workers picks up, economists expect many of these discouraged unemployed workers to slowly reenter the workforce and look for jobs again. That often leads to a paradoxical increase in official unemployment at the same time that more workers are getting jobs.
The Labor Department also revised job gains for January and February. February's were revised up from 192,000 to 194,000 jobs added. January's increase was revised to 68,000 from 63,000.