U.S. Economy Adds Jobs, but Unemployment Rate Rises

companies added more jobs than expected in April, but the unemployment rate
rose for the first time in five months and the economy's recent slowdown is
likely to keep a lid on gains.

Nonfarm payrolls rose by 244,000 last month as the private sector posted the
strongest employment gain in five years, the Labor Department said Friday in
its survey of employers. The March data were revised upward to show an
increase of 221,000 jobs, from a previous estimated gain of 216,000.

However, the unemployment rate—which is obtained from a separate household
survey—rose to 9.0% last month from 8.8% in March. It was the first increase
in the jobless rate since November, when it hit 9.8%.

The mixed data weren't what analysts expected. Economists surveyed by Dow
Jones Newswires had forecast payrolls would rise by 185,000 and that the
jobless rate would remain unchanged at 8.8%.

Even though the economy started growing almost two years ago, the pace has
been too slow to make up for ground lost during the recession of 2008 and
the first half of 2009. The economy has added some 1.5 million jobs over the
past year, but there are still seven million fewer jobs than the U.S. had
before the downturn. A slowdown in growth in the first quarter is expected
to keep companies from ramping up hiring in future months.

Friday's report showed private-sector employers, which account for about 70%
of the work force, added 268,000 jobs in April, the biggest rise since
February 2006. In March, employment in the private sector rose by 231,000.

The jobs breakdown from the employers survey showed continued gains in
manufacturing, mining and the service sector. Manufacturing added 29,000
jobs after a gain of 22,000 in March. In the services sector, the biggest
increases were in retail trade and professional and business services, as
well as education and health. Employment in the battered construction sector
posted another meager gain, and the housing sector remains a drag on the
economy.

Government employment fell by 24,000, mainly because of declines in state
and local governments, which are struggling to close their budget gaps.

Since the first-quarter slowdown, brought about by higher oil prices that
hurt consumer spending and raised business costs, there have been more signs
over the past month that the economy may be losing steam. The number of
Americans filing new claims for jobless benefits rose sharply, hitting the
highest level since last summer in the last week of April. The services
sector saw a steep decline in activity and a similar slowing in jobs growth.

The Federal Reserve last week kept its credit tap wide open to boost the
economy and jobs, a policy that has been criticized for stoking inflation.
Chairman Ben Bernanke believes the rise in commodity prices is likely to
prove temporary and said the Fed will be looking "very closely" at the labor
market to decide when to raise interest rates from close to zero.

A broader measure of the unemployment rate, which includes people who
stopped looking for work and those settling for part-time jobs, rose to
15.9% in April from 15.7% the previous month.

In another sign of the challenges still faced by the labor market, the
report showed 43.4% of unemployed Americans, or nearly six million people,
were out of work for more than six months in April. The longer someone is
without a job, the harder it is to find work.

Americans' incomes, which are crucial to fuel the spending needed to boost
the economy, remained subdued. Average hourly earnings of all employees rose
just $0.03 to $22.95. Over the past year, earnings have increased by only
1.9%. Higher prices for gasoline and groceries are squeezing consumer
spending.

Meanwhile, the average workweek for all employees on private payrolls was
unchanged at 34.3 hours in April.