Dow reaches 2011 high after unemployment falls

NEW YORK (AP) — A drop in the unemployment rate to a two-year low sent the Dow Jones industrial average to a new 2011 high today.

The Labor Department said the unemployment rate fell to 8.8 percent, the lowest since March 2009, as companies added workers at the fastest two-month pace since before the recession began. Approximately 216,000 new jobs were added to the economy last month, offsetting layoffs by local governments. Economists had expected the unemployment rate to remain at 8.9 percent.

“We are clearly seeing a breakout in the labor market,” said Paul Zemsky, the head of asset allocation at ING Investment Management. “The jobless recovery is ending and we are moving into a job expansion stage of the economy.”

Stocks rose across the market. Nine of the 10 company groups that make up the S&P 500 index moved higher, led by a 1.3 percent rise in industrials shares.

The Dow rose 75 points, or 0.6 percent, to 12,395. The Standard & Poor’s 500 index rose 9, or 0.7 percent, to 1,335. The Nasdaq composite rose 15, or 0.5 percent, to 2,796.

“This jobs report shows that we are in the early stages of a sustainable recovery in employment, and that is what’s letting the market put the recent correction behind us,” said Phil Orlando, chief equity strategist at Federated Investors.

The Institute of Supply Management reported a slight slowing in manufacturing growth during March. The trade group’s index of manufacturing activity slipped to 61.2 from February’s 61.4. However, the drop was expected after manufacturing hit its highest level since May 2004 during February.

The Commerce Department delivered more bad news on the construction industry. The government said construction spending fell in February to its lowest level since 1999.