Nonfarm payrolls grew at their fastest pace in 10 years in May, buoyed by recruitment for the decennial census, but private hiring slowed sharply as businesses opted to increase hours rather than hire new workers.
The Labor Department said on Friday payrolls rose 431,000 as the government hired 411,000 workers to conduct the population count. That was the largest monthly increase since March 2000 and marked a fifth straight month of gains.
Private employment, a barometer of labor market strength, increased just 41,000 after rising 218,000 in April. Employers did increase hours, however, and the average workweek increased to 34.2 hours from 34.1 hours in April.
Payrolls data for March and April was revised to show 22,000 fewer jobs created than previously reported. May's hefty employment gain lowered the unemployment rate to 9.7 percent from 9.9 percent in April.
Analysts polled by Reuters had expected non-farm payrolls to rise 513,000 and private businesses to create 190,000 jobs. The jobless rate had been seen dipping to 9.8 percent.
The economy has now grown for three straight quarters and the recovery from the worst recession since the Great Depression of the 1930s is broadening out.
The jobless rate is a drag on President Barack Obama's popularity and could cost the Democratic Party dearly in November's congressional elections, with voters in an anti-incumbent and anti-Washington mood.
Unemployment will probably remain high through the year as the millions of people who lost their jobs during the recession seek work.
The firming jobs market may encourage those who dropped out of the labor force to resume their search, which could keep the jobless rate elevated because workers are counted as unemployed only if they are actively looking for work.
Outside the census, hiring slowed significantly from the prior months. The dominant services sector, saw payrolls increase 37,000 after surging 156,000 in April. The goods producing sector created only 4,000 new jobs following 62,000 jobs in April. This was as construction employment fell 35,000 after gaining 14,000 in April.
Recruitment for the population count saw government employment rising 390,000, overshadowing the drag from jobs cuts in cash-strapped states and localities.
Job growth is critical to sustain a rebound in consumer spending, especially now that recovery in Europe is under threat from government spending cuts to bring down huge budget deficits.
The debt crisis, stemming from Greece's fiscal problems, has hammered global stock markets, but analysts so far see a limited impact on the U.S. economy.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)