US hiring slowed in April, unemployment rate dropped to 8.1 percent

By CHRISTOPHER S. RUGABER, AP Economics Writer

WASHINGTON (AP) -- U.S. employers pulled back on hiring in April for the second straight month, evidence of an economy still growing only sluggishly. The unemployment rate dipped, but only because more people gave up looking for work.

The Labor Department said Friday that the economy added just 115,000 jobs in April. That's below March's upwardly revised 154,000 jobs and far fewer than the pace earlier this year.

The unemployment rate dropped to 8.1 percent last month from 8.2 percent in March. It has fallen a full percentage point since August to a three-year low. But last month's decline was not due to job growth. The government only counts people as unemployed if they are actively looking for work.

In April, the percentage of adults working or looking for work fell to the lowest level in more than 30 years. Many have become discouraged about their prospects. More than 5 million Americans have been unemployed for six months or longer, an astonishingly high number almost three years into a recovery.

Stock futures dipped after the report was released.

Employers added an average of 252,000 jobs per month from December through February, a burst of hiring that raised hopes the economy would accelerate. But job gains have averaged only 135,000 in the two months since then. That's below last year's pace of 164,000 per month.

Weak job gains pose a threat to President Barack Obama's reelection. He is likely to face voters this fall with the highest unemployment rate of any president since World War II.

Some economists attribute the weak gains partly to mild winter, which led some companies to accelerate hiring in January and February. That may have weakened hiring in March and April.

"Over the next couple of months we would expect the monthly gains to settle back into a 150,000 to 200,000 range," Paul Ashworth, an economist at Capital Economics, wrote in a note to clients.

But others are concerned that this reflects a genuine slowdown.

"One month can be weather related, two months of weaker than expected job growth is dangerously close to a trend," Dan Greenhaus, an analyst at BTIG, an institutional brokerage firm.

The slowdown could heighten fears that high gas prices and sluggish income growth are weighing on the broader economy.

Economists noted that the job gains are consistent with the 2.2 percent annual growth in the first three months of the year. Faster growth will be needed to accelerate hiring.

The economy must create at least 125,000 jobs a month just to keep pace with population growth. It generally takes twice that number on a consistent basis to rapidly lower the unemployment rate.

Average hourly wages rose a penny in April, to $23.38. They have increased 1.8 percent over the past year, trailing the rate of inflation.

Manufacturers, retailers, and hotels and restaurants all added workers. So did professional services such as engineering and information technology. Shipping and warehousing firms, construction companies, and governments cut jobs.

Hiring in February and March was revised up to show additional job gains of 53,000.

There have been other signs that hiring will improve.

The number of people seeking unemployment benefits fell last week by the most in a year, the government said Thursday. That drop wasn't reflected in the April employment report, which was compiled from a survey taken earlier in the month. But it could bode well for hiring in May.

And earlier this week, the Institute for Supply Management, a private trade group, said factory activity grew at the fastest pace in 10 months and a gauge of manufacturing employment showed that hiring jumped.

Still, service companies expanded in April at the slowest pace in four months, according to a separate ISM survey. And the group said hiring at those companies, which employ roughly 90 percent of the work force, slowed.

The economy expanded at a 2.2 percent annual rate in the January-March quarter, down from 3 percent growth in the fourth quarter. Economists polled by the Associated Press forecast the economy will grow 2.5 percent this year. In a healthy economy, that would be considered average. But faster growth is needed to spur greater job creation.