The economy added 165,000 jobs last month, above analyst projections and an improvement over March’s increase of 138,000 jobs, and the unemployment rate edged down to 7.5%. Concerns of a spring slowdown sparked by last month’s weak report appear to be unfounded – but the details of the report show that sharp and sudden government cutbacks from the sequester are hurting the job market.

The first four months of employment data for the year paint an encouraging picture. Businesses have added over 800,000 jobs since the  start of the year, at an average clip of 203,000 jobs per month, and the unemployment rate has dropped 0.4 percentage points in that time.

Last month the picture looked very different, with initial data showing just 88,000 new jobs in March. But substantial revisions from the Bureau of Labor Statistics added 114,000 jobs to totals for the last two months, and pushed the March number up to 138,000.

The small drop in unemployment we saw in March rang hollow, as almost 500,000 workers left the labor force. This time, April’s unemployment rate decline was small, but real. In April, the ranks of the unemployed fell by 83,000, and 210,000 workers joined the labor force. In fact, the number of “discouraged workers” who have dropped out of the labor force is down by 131,000 from one year ago.

April’s jobs data is certainly more encouraging than March’s initial report – and substantial revisions suggest that growth over the last several months has been stronger than we first thought.

But sector-specific details show mixed signals, and weakness coming from government cutbacks is affecting more than just public sector workers:

  • Construction: The construction industry lost 6,000 jobs in April, the first monthly decline since last May. That’s not surprising, given that construction spending dipped by 1.7% in March, the second decline in the past three months. Private homes are keeping builders busy – housing starts jumped 7% to an annual rate of over 1 million in March – but government cut-backs are hurting the broader construction industry. Government construction activity fell 4.1%, the biggest drop in over a decade. The drop in construction employment shows how government cut-backs are creating weakness outside of the government sector itself.
  • Government: Government employment fell by 11,000, driven by an 8,000 job drop in the federal workforce. Public employment is down 89,000 from one year ago.
  • Manufacturing: Manufacturing employment was unchanged in April, and was up only a revised 2,000 jobs in March. Even the manufacturing work-week shrank slightly.  While manufacturing has been at the leading edge of the recovery, job growth in the sector has fallen off lately.
  • Retail and Food and Beverage: Consumers appear to be carrying the economy. Sectors driven by consumer spending continue to add jobs: retail trade jobs increased by 29,000 (587,000 over the last year) and food services employment was up 38,000 (and is averaging 25,000 new jobs per month over the last year). But there is some concern that consumers may slow down their spending – U.S. retail sales registered their steepest decline in nine months in March.