WRAPUP 6-Hiring by U.S. companies hits 5-year high in April

* April payrolls up 244,000, private jobs gain 268,000

* Private hiring largest since 2006

* Unemployment rate rises to 9 percent from 8.8 percent

* Mixed report bolsters hopes for the sluggish recovery
(Adds details, primary dealer survey, updates markets)

By Lucia Mutikani

WASHINGTON, May 6 (Reuters) - U.S. companies created jobs
at the fastest pace in five years in April, pointing to
underlying strength in the economy even as the jobless rate
rose to 9.0 percent.

Private sector hiring, including a big jump at retailers,
boosted overall nonfarm payrolls by 244,000, the largest
increase in 11 months, the Labor Department said on Friday.
Economists had expected a gain of only 186,000.

The private sector created 268,000 jobs, the most since
February 2006, while government payrolls shrank.

The data backed views the economic recovery would regain
speed this quarter after stumbling in the first three months of
the year. Earlier this week, other reports pointed to a slowing
in the labor market.

"What we're seeing is a sustained pick-up in hiring and it
suggests that businesses have gained enough confidence to look
past short-term fluctuations in demand," said Aaron Smith, a
senior economist at Moody's Analytics in West Chester,
Pennsylvania.

Investors on Wall Street cheered the report, which showed
job gains across the board, with the exception of government.
U.S. stocks rose for the first time this week, while prices for
longer-dated government debt fell.

The dollar rose broadly and some of the gains were driven
by a German news report, later denied, suggesting Greece had
raised the possibility of leaving the euro zone.

While the economy has created jobs for seven straight
months, gains remain too meager to make much of a dent in the
pool of 13.7 million Americans who are out of work.

A recent spike in first-time applications for state
unemployment benefits caused some economists to worry that job
growth could slow in May and June. Initial claims vaulted to an
eight-month high last week.

Still, the pace of job growth averaged 233,000 over the
past three months, an acceleration from 104,000 in the prior
three months that suggests the recovery is growing firmer.

Nigel Gault, chief U.S. economist at IHS Global Insight in
Lexington, Massachusetts, said the rise "shows good momentum
that should allow the economy to absorb the twin shocks from
the Middle East and Japan without too much damage."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

INSTANT VIEW: [ID:nN06285414]

Graphics:

Payrolls and economic growth: r.reuters.com/vak49r

Unemployment: r.reuters.com/rak49r

Payrolls gap: r.reuters.com/gek49r

Insider video: US NEC chair Goolsbee on unemployment:

link.reuters.com/dah49r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

JOBLESS RATE UP

The unemployment rate in April backed away from a two-year
low of 8.8 percent to rise for the first time in five months.
It is derived from a separate survey of households, which
showed a sharp decline in employment and a modest rise in the
size of the labor force.

Economists, however, place more weight on the larger,
less-volatile survey of employers, which found 46,000 more jobs
than previously thought were created in the prior two months.

The report capped a good week for President Barack Obama,
whose approval ratings received a lift from the killing of
Osama bin Laden. A healthier jobs market could prove key to his
hopes to win reelection in 2012.

The White House can also take relief from a big drop in oil
prices on Thursday that should soon drag gasoline costs lower.
Brent crude futures fell for a fifth straight day on Friday.

"We've added over the last 14 months more than two million
jobs in the private sector. This is the best month of private
sector job growth in five years. So I don't think that's
nibbling, that's clearly a move in the right direction," White
House economic adviser Austan Goolsbee told Reuters Insider.

The relatively vigorous expansion in payrolls in April, if
sustained, could encourage some members of the Federal Reserve
to begin pushing for interest rates hikes.

New York Federal Reserve Bank President William Dudley
minimized any move soon towards tightening saying the economy
has a "considerable way to go to meet the Fed's dual mandate of
full employment and price stability." For more see
[ID:nWEN2879].

Most economists agree, noting that there is still a huge
amount of slack in the labor market and wage growth remains
tepid. Average hourly earnings rose a mere 3 cents in April and
are up a modest 1.9 percent from a year ago.

A Reuters survey of economists at top financial
institutions showed many expected the U.S. central bank to
raise benchmark rates by the end of the third quarter of 2012.
[ID:nDYE7F702G]

Only a fraction of the more than eight million jobs lost in
the 2007-2009 recession have been recovered. Even at April's
relatively rapid rate of job growth, it would take nearly 2-1/2
years to reclaim all those jobs.

DETAILS OF REPORT FAIRLY UPBEAT

High gasoline and food prices weighed on U.S. economic
growth in the first quarter when the economy grew at a subdued
1.8 percent annual rate. It had expanded at a 3.1 percent clip
in the final three months of last year.

"GDP growth should pick up to more than 3 percent in the
second quarter. If oil prices stay down ... the economy can
maintain that pace in the second half," said IHS Global's
Gault.

Details of the payrolls report were generally upbeat, even
though government employment contracted for a sixth straight
month in April, shedding 24,000 jobs.

The bulk of gains in payrolls were in the private services
sector which created 224,000 new positions after adding 194,000
in March. Within that segment, retail saw a surge of 57,100
jobs -- the most since 2000 -- and leisure and hospitality
added 46,000 new workers.

Though fast-food chain McDonald's (MCD.N) last month
announced it was taking on 50,000 new staff, those jobs were
unlikely to have been included in April's payrolls as the
hiring was done after the survey period for the report.

Employment in goods-producing industries increased 44,000,
with construction payrolls climbing by 5,000 and manufacturing
gaining 29,000.
(Editing by Neil Stempleman and James Dalgleish)