Employment in the U.S. increased by far less than expected in the month of April, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March.

Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month.

The job growth in April was largely due to a sharp increase in employment in the leisure and hospitality sector, which added by 331,000 jobs as pandemic-related restrictions continued to ease in many parts of the country.

Notable job growth was also seen in other services such as repair and maintenance and personal and laundry services as well as local government education.

Meanwhile, the report also showed a steep drop in employment in temporary help services, which shed 111,000 jobs. Employment in couriers and messengers also slumped by 77,000 jobs.

The Labor Department also said the unemployment rate inched up to 6.1 percent in April from 6.0 percent in March, while economists had expected the unemployment rate to drop to 5.8 percent.

The unexpected uptick in the unemployment rate came as 430,000-person increase in the size of labor force outpaced the 328,000-person increase in the household measure of employment.

The report also showed average hourly employee earnings climbed $0.21 or 0.7 percent to $30.17 in April. Annual wage growth still slowed to just 0.3 percent in April from 4.2 percent in March.

“Overall, it is difficult to judge how much weight to put on this report at a time when most of the other evidence suggests economic activity is rebounding quickly,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “But it is a clear reminder that the recovery in the labor market is lagging the rebound in consumption”

Pearce said the lagging labor market recovery suggests it will be “many months” before the Federal Reserve judges the economy has made “substantial further progress” towards its full employment goal.

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