WASHINGTON -- American employers hired at the slowest pace in nine months in March, a sign that Washington's austerity drive could be stealing momentum from the economy.
The economy added just 88,000 jobs last month and the jobless rate ticked a tenth of a point lower to 7.6 percent largely due to people dropping out of the work force, Labor Department data showed on Friday.
Analysts polled by Reuters had expected a gain of 200,000.
The slower pace of growth in payrolls marks a steep reversal of the recent trend in which the labor market appeared to be stepping up its pace of recovery. It also comes after Washington increased taxes in January and just as across-the-board federal budget cuts began in March.
The slowdown in job growth could make policymakers at the Federal Reserve more confident about continuing a bond-buying stimulus program. Discussion at the central bank has been growing over whether to dial back the purchases, perhaps as soon as this summer.
Analysts have noted that the federal spending cuts have only just begun and will be a more substantial drag on the economy between April and June, when many government workers begin taking days off work without pay.
Government payrolls fell only 7,000 in March, reversing the 14,000-job gain from February.
Fed Chairman Ben Bernanke, who has said the labor market must show sustained improvement before monetary stimulus is eased, has voiced concern about the spending cuts.
The jobless rate fell as the labor force shrank by 496,000 people. The unemployment rate is derived from a survey of households which is separate from the survey of employer payrolls. The household survey actually showed employment fell by 206,000 in March.
Reporting by Jason Lange; editing by Andre Grenon.
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