Friday’s jobs report is the first to reflect the post-sequester world. March jobs numbers a big miss

The economy added far fewer jobs than expected last month, raising questions about the strength of the economic recovery and how much the recent round of spending cuts and tax increases are hurting growth.

The Labor Department reported Friday that the economy added 88,000 jobs in March while the unemployment rate dropped to 7.6 percent. The number was far below the expectations from analysts, who predicted the economy added about 190,000 jobs in March.

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“We all overshot it,” Austan Goolsbee, the former chairman of the Council of Economic Advisers in President Barack Obama’s first term, said on CNBC. “This is a punch to the gut. I mean, this is not a good number.”

Friday’s jobs report is the first to reflect the post-sequester world. With a divided Washington unable to reach a deal, a series of automatic budget cuts to nearly all government programs kicked in March 1, and economists have warned that the sequester could take a hammer to the still-recovering economy.

The nonpartisan Congressional Budget Office has projected the sequester could cost the economy 750,000 jobs this year and scale back economic growth by 0.6 percent.

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The report also rattled investors, with the Dow Jones Industrial Average dropping more than 160 points in early morning trading.

The new numbers also arrive as Washington is poised to reignite the budget wars next week, with the release of the much-delayed fiscal 2014 budget from the White House triggering anew a debate over taxes, spending and how best to boost economic growth.

Speaker John Boehner (R-Ohio) declared in a statement that the jobs report showed the White House’s economic policies “continue to make it harder for Americans to find work.”

“One of the best things President Obama can do is follow the House and outline a balanced budget next week – one that includes entitlement reforms that are not conditional on enactment of more tax increases, which will suppress growth instead of encourage it,” Boehner said.

Alan Krueger, chairman of the White House Council of Economic Advisers, put a more positive spin on the new data while saying they also bolster the administration’s case that more stimulus spending is needed on such initiatives as infrastructure projects.

“While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” he said in a statement. “It is critical that we continue the policies that are helping to build an economy that creates jobs and works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007.”