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    Dismal jobless report alarms

    The US job market sputtered again in March as hiring slowed sharply, hundreds of thousands of Americans gave up job searches, and the percentage of Americans participating in the labor force fell to its lowest level since 1979, the Labor Department reported Friday.

    Employers added only 88,000 jobs last month, just one-third of job gains in February and the fewest since June, when the economy struggled through the financial crisis in Europe. The unemployment rate slipped to 7.6 percent from 7.7 percent in February, but the decline was primarily the result of nearly 500,000 Americans giving up looking for work — a sign that the US economy is still not growing fast enough to reemploy the millions who lost jobs in the last recession.

    Meanwhile, the labor force participation rate — the percentage of working-age Americans employed or looking for jobs — fell to 63.3 percent, the lowest rate since May 1979.


    “It’s almost like we’re trying to start an engine, where we think it’s revving up and it loses momentum again,” said Nigel Gault, chief economist with IHS Global Insight, a Lexington forecasting firm. “It’s not catching, and it’s definitely not firing on all cylinders.”

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    The weakness in the labor market was viewed by analysts and investors as a setback after several months of solid job gains, including in February, when employers added nearly 270,000 jobs. The Dow Jones industrial average fell by as much as 171 points after the March statistics were released, but rebounded to regain all but 41 points, closing at 14,565.

    The disappointing employment report also makes it likely the Federal Reserve will continue its policies to keep mortgage and other interest rates near record lows to accelerate job growth by encouraging businesses and consumers to borrow and spend, analysts said. Earlier this month, with the economy showing signs of improvement, several Fed policy makers suggested that the time was approaching for the central bank to begin letting interest rates rise.

    But speaking at a forum in Boston Friday, Eric Rosengren, president of the Federal Reserve Bank of Boston, said, “a more aggressive response to persistently high unemployment rates is warranted.” Continued stimulus, he said, “is an appropriate response to labor market scarring.”

    While the nation has been steadily adding jobs for more than three years, the growth has not been strong enough to absorb new workers entering the labor market and reemploy those who lost jobs in the last recession. Long-term unemployment remains near all time highs. Last month, some 4.5 million Americans were jobless for more than six months — nearly 40 percent of all unemployed.


    Philip Swagel, an economist at the University of Maryland’s School of Public Policy, called long-term unemployment “the most disconcerting thing about the labor market today.”

    “If we don’t have a stronger recovery soon,” he said, “we will have a generation of people whose job prospects are permanently damaged.”

    Roger Ahlfeld of Framingham has been hunting for a job for almost two years and burning through savings. A former human resources executive at Uno restaurants, where he worked for 16 years, he said employers appear to be insisting on hiring people with very specific skills. For example, he has an advanced degree in hotel and restaurant management, but was told by one prospective employer that they wanted to hire a person with strictly hotel experience.

    “Companies are thinking they can be extremely choosey,” he said.

    Economists said the anemic hiring in March does not appear to signal a broader slowdown ahead. The length of the workweek, for example, increased slightly in March, a sign that companies are continuing to see demand for their products and services.


    In addition, revisions to data in January and February showed the nation added 61,000 more jobs in those two months than initially estimated.

    Sophia Koropeckyj, managing director at Moody’s Analytics, a forecasting firm in West Chester, Pa., said it is important to look at more than one month when assessing the economy. Data can swing sharply from month to month and are frequently revised.

    So far this year, the economy has created an average of 150,000 jobs a month, a slight acceleration from previous months. But, she added, “It’s really not enough to get the labor market moving. . . . We need to see more than 200,000 jobs a month, but that’s not going to happen for awhile.”

    Economists said cold, snowy weather in March might have contributed to the weak job growth. For example, building material and garden supply stores, which typically see business pick up as spring approaches, shed 10,000 workers last month, according to the Labor Department.

    But even as the winter finally passes, the economy faces more headwinds, economists said. The effects of the automatic federal budget cuts should begin to be felt in April, they said.

    “We’ll have to see whether the private sector will be strong enough to withstand what the federal government will bring down on the economy,” Koropeckyj said. “The economy will be taking a hit, and maybe this is the beginning.”

    Taryn Luna can be reached at Megan Woolhouse can be reached at