WASHINGTON — A springtime surge in hiring stretched into a second month as employers added nearly 300,000 new jobs in April, lowering the unemployment rate to 5.6%.
In a second dose of good economic news yesterday, congressional budget forecasters predicted this year's federal deficit would be smaller than they had expected.
The timing couldn't have been better for President Bush, who has been dealing with international fallout from the abuse of Iraqi prisoners by U.S. soldiers. The economy, which had been assumed to be a major drag on Bush's re-election bid, may prove otherwise.
The Labor Department reported that payrolls had risen for eight months in a row, with almost 900,000 new jobs having been created this year. Nearly three in four of those jobs were added in the last two months. The unemployment rate dipped in April from 5.7% to 5.6%.
''I'm officially declaring the jobless recovery dead,'' said Ken Mayland, president of ClearView Economics. ''I think we are now on a path of what will be substantial job gains.''
On Wall Street, the report sent stocks tumbling, with investors worried about the speeding economy's effect on interest rates. The Dow Jones industrial average fell almost 124 points to close at 10,117.34. The Nasdaq lost almost 20 points to close at 1,917.96. Analysts expect the Federal Reserve to start raising rates this summer.
Bush, promoting his economic policies yesterday on a tour of Iowa and Wisconsin, both of which he lost in 2000, said, ''Our economy is strong, and it is getting stronger.'' That's because ''we have left more money in the hands that earned it,'' he said, again crediting the tax cuts he has championed for good economic news. They also have contributed to record deficits.
This year's federal deficit could be less than the $477 billion predicted, the Congressional Budget Office said. It was the latest indication of possible improvement in the government's short-term fiscal picture.
Even so, the shortfall is at $284 billion for the first seven months of the fiscal year. That means the final 2004 deficit is likely to surpass or at least come close to last year's $374 billion, a record in dollar terms.
Bush is on track to be the first president since the Great Depression to have lost jobs during his watch. Hiring gains in recent months have helped shrink those losses to about 1.5 million. His administration was widely criticized for an overly optimistic forecast that 2.6 million new jobs would be created this year. Economists say the chugging economy could approach that mark.
''I don't think these two months of big increases are a flash in the pan,'' Mayland said.
Public support for Bush's handling of the economy stood at 43% early this month, according to an Associated Press-Ipsos poll. That was the lowest approval rating since Ipsos-Public Affairs began tracking the question in 2002.
Democratic challenger John Kerry said Bush shouldn't get a pass for yesterday's positive economic news.
''Any step forward in the job market is good news for America's workers, but let's be clear: We still have a long way to go to get America working again,'' Kerry said.
Hiring was widespread in April, with the service sector leading the way. Professional and business services employment rose substantially, by 123,000. In that category, gains were in employment services, including temporary employment firms, services to buildings and dwellings, management and technical consulting services and architectural and engineering services.
''The dam has broken,'' said Joel L. Naroff, president and chief economist at Naroff Economic Advisors Inc. ''After refusing to hire people for what seemed like forever, businesses have reversed direction and are now pumping up their payrolls.''
Hiring at temporary employment firms has surged by 261,000 in the past year, an indication that companies are growing. Because of intense overseas competition, however, employers have been skittish about taking on the cost of full-time, permanent workers.
Demand for permanent workers is picking up, said Tom Gimbel, president of the LaSalle Network, a Chicago-based staffing and recruiting firm.
''Companies are starting to get very optimistic,'' Gimbel said. ''They're very bullish on the economy.''
Employers still hold the cards, and people looking for jobs need to reduce expectations about salaries and benefits, Gimbel said.
The nation's struggling factories are turning around slowly. After 42 straight months of job losses, the manufacturing sector started hiring in February, based on Labor Department revisions.
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