New Hiring Cooled in April But Jobless Rate Held Steady

WASHINGTON -- U.S. employment expanded at its slowest pace since October during April, suggesting that economic activity waned a bit heading into the second quarter.

Yet overall labor market conditions remain generally sound, with unemployment still near five-year lows and average hourly wages up at their fastest annual pace in almost five years, which could put upward pressure on inflation and interest rates.

Nonfarm payrolls climbed 138,000 last month after rising by 200,000 in March and 200,000 in February, both downwardly revised, the Labor Department said Friday. Previous estimates showed a 211,000-job increase in March and a 225,000 gain in February. The unemployment rate was unchanged at 4.7% last month.

The median estimate of 23 economists polled by Dow Jones Newswires and CNBC had called for a much steeper April payroll increase of 205,000 and a 4.7% unemployment rate.

The slow rise in April jobs could limit some concerns that the economy's running too hot to contain inflationary pressures. Fed officials have repeatedly cautioned that high resource utilization -- and employment is considered a key indicator of resource use -- could pose a risk to underlying inflation.

In the minutes of their March 28 meeting, policymakers said "there were as yet few signs that any tightness in product and labor markets was adding to inflation pressures" but "participants observed that there was a risk that continuing increases in resource utilization could add to inflationary pressures."

And the 0.5% rise in average hourly earnings last month and 3.8% annual rise -- the fastest annual gain since August 2001 -- could heighten that latter concern about inflation.

Economists widely expect the Fed to raise rates a 16th-straight time to 5% when it meets next on May 10. Fed Chairman Ben Bernanke, in Congressional testimony last month, said the Fed could pause its tightening campaign at some point, but stressed that such a decision wouldn't preclude further tightening steps down the road.

The Labor Department said hiring last month in goods-producing industries rose by 37,000. The manufacturing sector increased payrolls by 19,000, after adding just 1,000 the month before. The construction sector added 10,000 jobs last month.

Service-sector employment went up by 101,000, matching its slowest gain since October. Retail payrolls fell by 36,100. Business and professional services companies added 28,000 payrolls, while education and health services added 35,000.

Average hourly earnings rose $0.09 to $16.61 last month. That 0.5% monthly increase was the fastest since October. The average work week was up 0.1 hour at 33.9 hours.