Job losses shrink in April, but jobless rate goes to 8.9%

— -- Employers shed 539,000 jobs in April, pushing the nation's unemployment rate to 8.9%, but the pace of job losses slowed, leading some analysts to predict the recession will end in a few months.

A record 13.7 million Americans were out of work last month and 5.7 million jobs have been lost since the downturn began in December 2007, the Labor Department said.

The jobless rate was up from 8.5% in March and the highest since fall 1983. A year ago, unemployment was 5%.

Still, the smallest number of jobs losses in six months provided the latest and perhaps most emphatic in a series of signs that the recession's ferocity is easing.

"It's a step in the right direction, but we still have a long way to go," says Maury Harris, chief U.S. economist for UBS.

In a research note, Nigel Gault, chief U.S. economist of IHS Global Insight, was a bit more upbeat, saying, "There is light at the end of the tunnel, and it is getting brighter."

The news helped lift stocks, with the Dow Jones industrial average gaining more than 100 points in midday trading.

Recent reports have shown manufacturing and services industries shrinking more slowly. Also, consumer spending and confidence have ticked up and the housing market has shown signs of bottoming.

Analyst Richard Yamarone of Argus Research expects the recession to end by late summer but, like many economists, predicts unemployment will remain high throughout 2010. Federal Reserve Chairman Ben Bernanke testified last week that he expects unemployment to peak at slightly more than 9% early next year.

Harris says enthusiasm over April's decline in job losses was restrained by the fact that it was partly due to the addition of about 60,000 government workers for the 2010 census.

"We have to appreciate that they're temporary (workers)," he says.

Still, the 539,000 job cuts was far less than March's 699,000 and January's peak of 741,000.

"The labor market is still reeling like crazy," says Joel Naroff, head of Naroff Economic Advisors. "On its own this would be considered a terrible report, but put in the context of where the numbers had been, it's not as bad."

He says many of the April layoffs were planned months ago, while the economy was in its worst straits, and he expects the pace of the cuts to trail off sharply this summer.

Another relatively positive sign:The so-called underemployment rate — which includes the unemployed, people working part time even though they wanted full-time work and those who stopped looking for work — was up only slightly in April, to 15.8% vs. 15.6% in March. That's still the highest since those records began in 1994 but the rate had been rising far more sharply earlier this year.

And the work week, which dipped to 33.2 hours in March, lowest since the government began tracking hours in 1964, did not fall further last month.

On the negative side, average hourly earnings rose just a penny to $18.51 from $18.50, vs. increases of 3 cents or 4 cents in previous months. That underscores that employers are responding to the higher demand for fewer jobs by cutting wages, and that limits consumer purchasing power, Harris says.

Fortunately, "the 90% (of Americans who are employed) are spending as if they're unemployed," Naroff says.

Unemployment remains high for a variety of ages and ethnic groups. The jobless rate for African Americans rose to 15% in April from 13.3%. The rate for 16-19-year-olds was 21.5%, down from 21.7% in March.

Job losses cut across a wide swath of industries:

• Manufacturers chopped 149,000 workers, 17th consecutive month of declines.

• Construction firms shed 110,000 jobs.

• Retailers trimmed 46,700 jobs, including 9,300 at car dealerships.

• Hotels cut 8,000 workers, though that's down from a loss of 22,600 in March.

• Financial and insurance firms lost 25,300 jobs.

• State, local and federal governments offered a bright spot, adding 72,000 jobs.