Two car bombs exploded in Baghdad's Sadr City on Tuesday, killing at least 10 people and wounding 38 in the latest attack targeting Shi'ite areas as a political crisis threatens to revive sectarian strife in Iraq.

The first blast hit a group of labourers gathering to wait for jobs, leaving a chaotic scene of scattered shoes and food, and pools of blood. The bomb killed at least eight people and wounded 24, police and hospital sources said.

We were all standing waiting to earn our living and all of a sudden it was like a black storm and I felt myself thrown on the ground, said Ahmed Ali, a 40-year-old labourer whose face and hair were burned by the explosion.

I fainted for a while then I woke up and hurried to one of the cars to take me to the hospital, said Ali, lying on a bed in the emergency room at Imam Ali hospital in Sadr City.

The second blast near a traffic roundabout in Sadr City killed two people and wounded 14 others, the sources said.

Violence in Iraq has dropped sharply from the height of sectarian killing in 2006-2007, but insurgents and militias still carry out daily attacks and assassinations in an attempt to undermine the government.

Iraq has been hit by a series of bombings targeting Shi'ites during the worst political crisis in a year, which threatens to break up a fragile coalition government and has raised fears of renewed sectarian violence after U.S. troops left on December 18.

Prime Minister Nuri al-Maliki's government moved to arrest Sunni Vice President Tareq al-Hashemi on charges he ran a death squad and then sought to sideline a Sunni deputy prime minister after he branded Maliki a dictator.

Hashemi denied the charges and sought refuge in Iraq's semi-autonomous Kurdish region, where he is unlikely to be arrested.

The Sunni-backed Iraqiya political bloc then announced a boycott of parliament and several Iraqiya ministers have stayed away from cabinet meetings in protest. Others have attended, underscoring splits in the alliance.

The turmoil has fuelled fears that Maliki is trying to shore up Shi'ite power and sideline Iraqiya. The political blocs began talks last week to try to organise a national conference to resolve their differences.

A series of bombings in Shi'ite areas of the capital on December 22 killed at least 72 people and wounded 200 others. Scores more were killed in attacks targeting Shi'ite pilgrims this month.

(Writing by Aseel Kami; Editing by Louise Ireland)