By Sarah Chaney Cambon and Gwynn Guilford 

U.S. employers added a modest 266,000 jobs in April, far short of the 1 million expected among economists, and unemployment rose to 6.1%.

The slowdown in hiring signaled a potential slowdown in economic momentum, at least temporarily, as some businesses struggled to find workers and faced supply-chain issues.

The deceleration came after payrolls rose a downwardly revised 770,000 in March and an upward revision of 536,000 in February, the Labor Department said Friday. Unemployment rose from 6% a month earlier, but more people entered the workforce in April.

Higher vaccination rates, fiscal stimulus and easing business restrictions are converging to support stronger spending across the U.S. But many businesses are reporting they can't find enough workers, a phenomenon that could restrain economic growth in the coming months.

The leisure and hospitality sector, including restaurants, accounted for the bulk of employment creation in April, adding 331,000 jobs. The Labor Department said that reflected an easing of pandemic-related restrictions in many parts of the country.

Those gains were partly offset by job losses in several other sectors. Temporary-help employment declined by 111,000 last month, manufacturing employment was down 18,000 -- predominantly in motor vehicles where chip shortages idled some factories. Retail jobs fell by 15,000 and healthcare jobs declined by 4,000.

Signs of labor-market tightness emerged in Friday's report.

Wages for workers rose in April, a sign that some employers were lifting pay to attract or retain employees. Average hourly earnings for private-sector employees by 21 cents to $30.17 in April. The gain is notable because strong hiring in the lower-wage hospitality sector would typically put downward pressure on average earnings.

The average workweek increased to 35 hours in April, an indication some employers ramped up worker hours to compensate for the lack of labor.

"Details of the data show signs that the pool of available labor is extremely tight," Jefferies economists wrote in a note to clients. "Employers are turning to higher wages to entice workers off of their couches" and asking current employees to cover scheduling gaps.

"Outside of the possibility that employers are unable to find people willing to work to fill positions, the weakness is totally baffling," the economists wrote. "Nothing in the lead-up to today suggested that we would see a weak number."

The number of workers on temporary layoff, meaning they expect to return to their prior jobs within six months, rose slightly in April, reversing what had been a steady decline in that measure since surging a year earlier. That could reflect manufacturing furloughs. The number of people who voluntarily left jobs also rose for the second-straight month, potentially indicating increasing confidence among workers that better positions are available.

Gross domestic product, the broadest measure of goods and services made in the U.S., grew at a 6.4% seasonally adjusted annual rate in the first quarter. Economists expect households -- many of them vaccinated and with a recent round of stimulus money -- to further power growth this year by shelling out money on services.

Businesses are seeking workers to meet the surge in spending. Job postings on Indeed, a job-search site, were up 24% by the end of April, compared with February 2020, just before the pandemic took hold in the U.S.

One year ago, the jobless rate skyrocketed to 14.8% -- a record for data tracing back to 1948 -- and payrolls dropped by a historic 20.7 million. Business reopenings last summer helped the economy recoup some of the lost jobs. But the recovery remained incomplete as Covid-19 continued to spread, triggering continued restrictions on businesses and heightened caution among many consumers.

Now vaccinations are allowing the U.S. to contain coronavirus cases, and jobs in sectors with the steepest losses at the onset of the pandemic are starting to return. The number of small-business employees punching in at entertainment firms is now 11% higher than in October 2020, while employment in hospitality, retail and food services are all up around 2%, according to Homebase, a scheduling-software company.

Paul Keeler, owner of two barbecue restaurants and a steakhouse in Arizona, said the businesses are adding workers to meet a surprising upswing in demand. Sales across the three restaurants surged by 17% at the start of this year compared with the beginning of 2019, when he said business was hot.

Many people have traveled to Arizona from nearby states with tighter restrictions such as California, Oregon and Washington, helping boost business, Mr. Keeler said. Others are feeling more confident to dine out because of vaccinations.

"The pent-up demand has been tremendous," Mr. Keeler said. "Because we've been so busy, we've been interviewing and hiring every week."

Regions that suffered more from the pandemic and imposed greater restrictions are showing signs of faster rebounds. For example, Homebase data indicated that small-business employment in Florida has held relatively steady since October 2020, compared with steep climbs in New York and California since January. The number of workers clocking in at New Mexico small businesses is now up nearly 3% from levels seen last autumn.

Heritage Hotels & Resorts has seen a pickup in customer bookings in the past month as New Mexico eases restrictions, said Molly Ryckman, the company's vice president of sales and marketing. Earlier this week, New Mexico officials lifted hotel occupancy restrictions in counties where Heritage operates several boutique hotels. Restrictions were relaxed in the other counties in which it operates a few weeks ago.

Heritage has added hundreds of workers in the last couple of months, though staffing is still less than half of pre-pandemic levels. The company currently has 150 open jobs but is struggling to quickly fill the positions. As a result, it is increasingly looking at candidates without previous hospitality experience, Ms. Ryckman said.

"Especially in a destination like Santa Fe, when you shut down every museum and every restaurant and all of those are reopening at the same time, it makes it a challenge to fully staff and reopen," she said.

Many employers across the U.S. are reporting they can't find enough workers, even though millions of people are unemployed. This phenomenon could restrain economic growth in the coming months.

There are several factors keeping potential workers on the sidelines. Many Americans aren't working for fear of getting or spreading Covid-19. Businesses are reopening ahead of schools, leaving some parents without child care. Some people are receiving more in unemployment benefits than they would earn in the available jobs.

Economists are concerned that the labor-force participation rate, or share of people working or seeking work, will recover slowly. The rate was at 61.5% in March, down from 63.3% in February 2020 before the pandemic hit.

Mercury Marine, a boat-engine manufacturer based in Fond du Lac, Wis., is seeing a strong appetite for its products, said Chris Drees, the manufacturing company's president.

"People have found out boating is an awesome way to social distance and get away a little bit from the lockdowns," Mr. Drees said. "We've seen a real boom in the boating industry this last year, and it looks to continue."

The company plans to add 250 manufacturing employees to its main campus this year. But Fond du Lac's unemployment rate of about 4% is well below the national average, meaning there are relatively few people in the area available to work, Mr. Drees said.

Mercury Marine is ramping up overtime hours so it can make enough engines as it tries to find more workers. But "if we can't get those employees, it will certainly hinder our ability to produce," Mr. Drees said.

Eric Morath contributed to this article.

Write to Sarah Chaney Cambon at and Gwynn Guilford at


(END) Dow Jones Newswires

May 07, 2021 09:51 ET (13:51 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.