By Renae Merle
Washington Post Staff Writer
Saturday, May 8, 2010; A08
The economic recovery that has bolstered manufacturing and retail recently might have finally reached the labor market, according to government data released Friday showing that employers hired workers last month at the quickest pace in four years.
The economy added 290,000 jobs, the Labor Department reported, far more than analysts had expected. The figure was embraced by economists who have lamented that the improvements in the economy, including in the housing and manufacturing sectors, had not been accompanied by encouraging news about the workforce. U.S. employers have added jobs for the past four months, according to the government survey.
At the same time, the unemployment rate ticked up slightly to 9.9 percent last month.
The White House pointed to the report as validation of its efforts to stimulate the economy.
"These numbers are particularly heartening when you consider where we were a year ago with the economy in free fall," President Obama said Friday from the Rose Garden. "Yes, we've got a ways to go. But we've also come a very long way. And we can see that the difficult and at times unpopular steps that we've taken over the past year are making a difference."
Employers have added more than 500,000 jobs this year, not nearly enough to compensate for the more than 8 million lost during the recession, but a step in the right direction, economists said.
"The economy has been in a recovery since the middle of last year. For that recovery to turn into an expansion and to be self-sustaining, there has to be job growth and income growth," said Stuart G. Hoffman, chief economist for the PNC Financial Services Group. "Now we're getting that."
The employment figure for last month was boosted by 66,000 temporary workers hired for the 2010 Census. But economists were most excited about the signs of life in the private sector, the engine of the economy, which added 231,000 jobs. Analysts had expected the report to show that 162,000 jobs were added overall last month.
The report was not uniformly positive. The unemployment rate, after remaining steady at 9.7 percent for the past three months, inched up to 9.9 percent in April, as more people reentered the labor force and tried to find a job.
The monthly survey includes people who are actively looking for work. So, as improvements in the economy spur idle workers to resume their search, the unemployment rate actually can rise.
About 195,000 workers who had given up their job search began looking for work last month, according to the Labor Department. Overall, the workforce increased by 805,000 last month, including people who were looking for jobs for the first time.
Yet even as more people began looking for work, the number of "discouraged" workers -- those not looking because they don't think there is a job available for them -- also rose to 1.2 million last month. And the number of people out of work for an extended period -- at least 27 weeks -- reached 6.7 million.
"It is entirely possible we haven't seen the unemployment rate peak yet," said Paul Ashworth, senior U.S. economist for Capital Economics.
Economists expect the unemployment rate to stay above 9 percent for some time, potentially reaching 10 percent or higher in the coming months.
"If the economy is going to create jobs at such a rapid clip, then the unemployment rate could go up a bit, but it would be far less than people had been worried about," said Bill Cheney, chief economist for John Hancock Financial Services.
Congress is considering several measures to spur job growth, including a provision to give money to state governments to help prevent layoffs of teachers and other state employees. The House passed a bill Thursday that would give people rebates if they bought home products to reduce energy use. The purchases would create jobs, such as installing energy-efficient windows, lawmakers say.
The Obama administration sent the House legislation Friday to establish a $30 billion fund to encourage small banks to lend to small businesses, a proposal that the president first announced during the State of the Union. Banks that tap the fund would have to pay a higher interest rate if they did not increase lending after receiving the capital infusion. But the interest rate would fall if they increased lending to small businesses by at least 10 percent.
The program has been expanded to include an additional $1 billion to $2 billion in grants for states to use to encourage small-business lending through their own programs. This state initiative "will help expand lending for small businesses and manufacturers at a time when budget shortfalls are leading states to cut back on vitally important lending programs," Obama said Friday.
The government report also showed that the labor market was stronger over the past few months than announced earlier. Payrolls grew by 230,000 in March, instead of the 162,000 first estimated, according to the Labor Department. And in February, employers added 39,000 jobs, instead of losing 14,000.
Economists say the U.S. economy has to add at least 130,000 jobs a month just to keep up with population growth, and the employment gains of the past two months have been enough to get ahead. "We have now had two months of the economy creating 200,000 jobs a month, and that is strong, strong enough to drive the unemployment rate back down," Ashworth said.
Even the manufacturing sector, which has long shed employment, showed improvement, adding 44,000 jobs, the report said. That was the biggest uptick in more than a decade.
Also, the average length of the workweek increased to 34.1 hours from 34 hours, although average hourly earnings were flat, increasing by 1 cent to $22.47.
"That means that not only are people working, they are working longer hours, and there is even some overtime," Hoffman said.
Staff writers Perry Bacon and Michael D. Shear contributed to this report.