U.S. employment growth slowed in April

updated 7:44 p.m. ET May 5, 2006

WASHINGTON - New hiring slowed significantly in April as employers added just 138,000 people to their payrolls, the slowest pace of job growth in six months. The overall unemployment rate held steady at 4.7 percent.

The latest snapshot of labor market activity, released by the Labor Department on Friday, also showed a sharp jump in workers’ wages, which is sure to raise inflation fears.

Wages grew by 3.8 percent over the last year, the biggest 12-month gain since August 2001.

The 138,000 gain in payrolls was the smallest since October when businesses still reeling from the blows of the Gulf Coast hurricanes added only 37,000 jobs.

The weakness in April’s payrolls mostly reflected job losses in retailing. Manufacturers actually added the most number of jobs in nearly two years. Financial firms, professional services, construction and other companies all boosted employment during the month.

The payroll performance in April was weaker than economists were expecting. Before the release of the report, they were predicting a gain of around 200,000 jobs for the month.

“This suggests that companies are not aggressively hiring,” said Lynn Reaser, chief economist at Bank of America’s Investment Strategies Group. “Companies are showing some caution with the expectation that rising energy prices, higher interest rates and a slowing housing market may temper overall economic activity down the road,” she said.

CNBC VIDEO Jobs data eyed May 5: Treasury Secretary John Snow discusses the April employment report on CNBC Friday. CNBC

Still, economists didn’t believe that April’s slower job growth was a sign that the economy is heading for a serious setback. They pointed out that other recent barometers — including retail sales, manufacturing and service-sector activity — all looked very healthy for April.

Job gains in February and March, meanwhile, turned out to be less than previously estimated. Payrolls grew by 200,000 in each month — a still good showing. The government had reported a gain of 211,000 jobs in March and 225,000 in February.

The report comes as President’s Bush standing with the public has deteriorated. Bush’s job-approval rating, meanwhile, is now at 33 percent, the lowest in AP-Ipsos polling.

Bush called Friday’s job growth good and said taxes need to remain low to keep the economy growing.

Workers’ average hourly earnings stood at $16.61 in April, a big 0.5 percent jump from March. Economists were expecting a more moderate 0.3 percent rise. Over the last 12 months, earnings went up by 3.8 percent, the biggest 12-month gain since August 2001.

Wage improvement is good for workers but a rapid, sustained acceleration can ignite inflation concerns.

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