Not out of the woods just yet

WASHINGTON - The economy got what it needed in April: A burst of hiring that added a net 290,000 jobs, the biggest monthly total in four years. It showed employers are gaining confidence as the recovery takes deeper root.

But people who had given up on finding jobs are gaining confidence, too, and are now looking for work. That's why the unemployment rate rose from 9.7 percent to 9.9 percent and will likely go higher.

The new jobs, generated by sectors across the economy, are the first sign that the recovery is adding significant numbers of new jobs - even if not enough to absorb the influx of jobseekers.

"Companies feel more comfortable that growth in the economy and in their own sales is here to stay and that they can start preparing for the future and add to their payrolls," said Joel Naroff, president of Naroff Economic Advisors.

The unemployment rate rose because 805,000 people without jobs entered the labor force in April to search for work.

"Individuals are gaining confidence in their ability to find a job and are now throwing their hats into the ring," said John Challenger, CEO of outplacement firm, Challenger, Gray & Christmas.

Kelley Bryan had dropped out of the market last year to attend culinary school after 20 years as a secretary. But she started looking for work again in March.

"I was starting to get to the point where I felt like I needed to get a job," she said. "I was living off unemployment and just feeling guilty."

Not for long. She soon was hired as a restaurant manager in suburban St. Louis. Demand has picked up enough that she's looking to switch jobs again and is interviewing at hotels.

"It's a competitive field, but there are plenty of jobs," she said.

Many economists predict the unemployment rate will rise as people who had given up on finding a job feel better about their prospects. The labor force includes employed people and people actively seeking work - not those who have stopped looking.

The unemployment rate in October hit 10.1 percent, a 26-year high. Some economists now think the rate could go a bit higher and peak at 10.2 percent by June. Still, that's far lower than some forecasts earlier this year of 11 percent. Unemployment hit a post-World War II high of 10.8 percent at the end of 1982 as the country was emerging from a severe recession.

President Barack Obama called April's job growth "very encouraging news" but said much remains to be done to put more Americans to work.

Wall Street appeared to look past the positive U.S. jobs report and instead focused on Europe's spreading debt crisis. Stock prices fluctuated wildly. The Dow Jones industrial average closed down nearly 140 points.

The number of jobs added in April signaled that businesses are more confident, thanks to rising customer demand. Consumers increased spending in March by the largest amount in five months. Factory production grew in April at the fastest pace in nearly six years. Demand grew briskly for a variety of services in that same month.

Also heartening: Employment in February and March turned out to be stronger than previously thought. Payrolls grew by 230,000 in March, better than the 162,000 first reported. And 39,000 jobs were actually added in February, compared with the previous estimate of a loss of 14,000.

Manufacturers in April added the most jobs since 1998. Construction companies boosted jobs for the second straight month. Retailers, professional and business services, education and health services, leisure and hospitality, and the federal government, which hired 66,000 temporary census workers, all posted job gains.

Jobs were cut in state and local governments, which are suffering through budget crises; transportation and warehousing firms; and information companies, mostly telecommunications firms.

Sandra Westlund-Deenihan, president of Quality Float Works, recently rehired a welder laid off last summer. She plans to hire at least three more people soon. The firm, which employs 18 people and is based in Schaumburg, Ill., makes metal floats used in air conditioners, gas pumps and display cases at grocery stores.

She's now more confident about the recovery, which she feared might be "a false hope" earlier this year.

"Orders are coming in consistently," she said. "Most customers want everything right now because they had let their inventories run down during the recession."

The 290,000 net job gains in April come from a survey of businesses. The government also does a separate survey of households. The household poll found far larger job gains last month: 550,000 more people said they were employed. The household survey is used to calculate the unemployment rate.

Economists are encouraged by the sharp jump in employment in the household survey: It's shown a net 1.6 million jobs created over the past four months. By contrast, the business payroll survey has shown 573,000 jobs added in the same period.

The difference is encouraging because the household survey often is the first to detect employment trends in a recovery. Some economists say that's because it can better pick up hiring trends at startup companies. After the 2001 recession, for example, the household survey showed job gains before the payroll survey did.

The household poll is also more inclusive. It covers agricultural workers, the self-employed, domestic employees and people who work in family businesses without pay - none of whom are included in the payroll survey.

There will need to be far more job growth to reduce unemployment.

Friday's report showed that 15.3 million people were out of work in April. And the number of people working part time who would rather have full-time jobs rose by 98,000 to 9.2 million.

Counting people who have given up looking for work and part-timers who would prefer to be working full time, the so-called underemployment rate rose to 17.1 percent in April, up from 16.9 percent in March. It's close to record high of 17.4 percent set in October.

The number of people out of work six months or longer reached 6.7 million in April, a new high. These people made up 45.9 percent of all unemployed people, also a record high.

Hiring isn't expected to be robust enough anytime soon, and economists think unemployment will remain above 9 percent by the November midterm elections. That could make Democratic and Republican incumbents in Congress vulnerable.

For employers to boost hiring significantly, the economy would need to grow at an annual rate of 6 percent to 8 percent a quarter, rather than the 3.2 percent pace logged in the first three months of this year, economists say. Such growth would mean shoppers were spending much more freely.

That scenario isn't likely, both because of high unemployment and sluggish wage gains. Nationwide, average hourly earnings rose just a penny in April, to $22.47.

Another issue is that small businesses, which usually help drive job creation during recoveries, are having trouble getting loans. That tight credit is crimping their ability to expand operations and hire.

Many economists think it will take until at least the middle of the decade to lower the unemployment rate to a more normal 5.5 percent to 6 percent.