U.S. employers cut 539,000 jobs in April, the fewest since October, according to government data on Friday that signaled the economy's steep decline may be easing.

However, the Labor Department said the unemployment rate soared to 8.9 percent, the highest since September 1983, from 8.5 percent in March. Payrolls figures for March and February were revised to show job losses were 66,000 more than previously reported.

Losses in April were tempered by a big 72,000 jump in government payrolls and overall, private sector employment fell by 611,000 last month.

Still, the better-than-expected data was further confirmation that the intensity of the recession was starting to fade, with economic activity expected to gradually recover toward the end of the year.

It's all going to add to the conviction that the economy is approaching bottom, said Pierre Ellis of Decision Economics in New York.

U.S. stock index futures pared gains after the data, while government bond prices turned higher.

Analysts polled by Reuters had forecast non-farm payrolls dropping 590,000 in April. The unemployment rate had been forecast to rise to 8.9 percent from 8.5 percent in March.

The labor market may have seen its worst months for job cuts. It will be a slow healing process, but improvement is expected to come by mid-year, said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.

The report showed job losses across almost all sectors, although at a less steep pace than in the previous months.

The manufacturing sector lost 149,000 jobs in April, after shedding 167,000 the prior month. Construction industries cut 110,000 jobs after losing 135,000 in March.

The service-providing industry slashed 269,000 positions after eliminating 381,000 in March.

Payrolls in the education and health services sector increased by 15,000.

Since the start of the recession in December 2007, the economy has lost 5.7 million jobs, the department said.

The length of the average work week was unchanged at 33.2 hours in April. Average hourly earnings edged up to $18.51 from $18.51.

(Additional reporting by Ellen Freilich in New York; Editing by Andrea Ricci)