Employment picked up more than forecast in April and the jobless rate unexpectedly declined to a four-year low of 7.5 percent, showing federal budget cuts failed to destabilize the U.S. labor market.

Payrolls expanded by 165,000 workers last month following a revised 138,000 increase in March that was larger than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected a 140,000 gain. Revisions added a total of 114,000 jobs to the employment count in February and March.

Hiring advanced last month even as employers witnessed the onset of planned government spending reductions, which the Federal Reserve said are hindering the economy. The expansion is projected to cool this quarter before picking up again as the cuts continue, consumer spending eases and companies pull back.

“The demise of this recovery is grossly exaggerated,” said Eric Green, global head of research at TD Securities Inc. in New York, who projected a 162,000 gain in payrolls. “We’re still in a soft patch, but the job market is not falling apart. The U.S. labor market is in much better shape than most people feared.”

Stock futures jumped after the report. Standard & Poor’s 500 Index futures expiring in June rose 0.7 percent to 1,603.70 at 8:51 a.m. in New York.

Rate Drops

Payroll projections ranged from gains of 100,000 to 238,000 following an initially reported 88,000 increase in March, according to the Bloomberg survey.

Private payrolls, which don’t include jobs at government agencies, increased by 176,000 in April after a revised gain of 154,000 the previous month. Economists forecast they would rise 150,000 following an initially reported 95,000 gain in March.

The jobless rate dropped to the lowest level since December 2008 from 7.6 percent in March. The rate, which is derived from a separate poll of households, was forecast to hold at 7.6 percent, according to the Bloomberg survey median.

The labor market has been one of ups and downs for Chuck Aldrich of Clarion, Iowa.

The past three years had been tough for the 55-year-old, who now builds corn sprayers for Hagie Manufacturing Co. in Clarion. He was construction site flagman in 2010, a job he described as “sporadic.”

After several other gigs that included a position that ended when the employer downsized, Aldrich began collecting unemployment benefits last year and enrolled in a class that complemented his engineering degree. That led to his current job at Hagie.

Watching Spending

“It’s a lot easier with the money coming in,” said Aldrich, who is buying a new house because of his income gains. “I don’t have to watch my spending quite as tightly.”

Companies like Domino’s Pizza Inc. have indicated they still see strong enough demand to justify increasing their headcounts. The Ann Arbor, Michigan-based pizza chain reported sales at stores open at least 12 months increased in the first quarter by more than 6 percent from a year earlier.

“We’re absolutely hiring right now,” Chief Executive Officer Patrick Doyle said during a May 1 interview on Bloomberg Television. He said “a more comfortable consumer” is driving demand and allowing his business to expand. “Just in the U.S., with 5,000 stores, we could easily hire 10,000 people today.”

Temporary-help services added 30,800 workers to payrolls in April, the most since February 2012. Other industries adding jobs included leisure and hospitality, retail trade and education and health services.

Factory Employment

While employment at factories stagnated in April after the addition of 2,000 in March, according to today’s report, Ford Motor Co. is among manufacturers that plan to step up hiring.

Ford, reacting to U.S. pickup sales that have gained momentum for almost two years straight, said yesterday it plans to hire workers at an F-150 truck factory to boost output. The No. 2 U.S. automaker will add more than 2,000 employees at its plant in Claycomo, Missouri, for the extra pickup production and to begin building the Transit commercial van in mid-2014.

“It’s a huge vote of confidence in our truck, our sales and what’s going on in the industry overall and the economy,” Joe Hinrichs, Ford’s president of the Americas, said in a telephone interview. “We wouldn’t be hiring if we didn’t think it was going to last. It is a strong indication of how we feel about our continued leadership in the segment.”

Today’s employment report also showed average hourly earnings rose 1.9 percent from a year earlier to $23.87.

The workweek shrank to 34.4 hours for all U.S. employees on average from 34.6 hours in March. Part of the reason may be reflected in an increase in part-time employment.

Full Time

The number of employees not working a full week rose to 27.5 million from 27.4 million. Some 278,000 more employees were working part-time for economic reasons.

Officials at the Fed are still looking for greater progress in reducing unemployment. The central bankers said earlier this week that they plan to maintain their $85 billion monthly pace of bond purchases to spur growth and employment prospects and are prepared to raise or lower the level of purchases as the economic outlook evolves.

“Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated,” the Fed said in a May 1 statement. While pointing out that consumer spending, business investment and the housing recovery have advanced, the central bankers noted that “fiscal policy is restraining economic growth.”

Fiscal Policy

The monetary policy makers’ concern stems from the planned budget reductions, known as sequestration, that commenced on March 1. The Congressional Budget Office has estimated the cuts will trim the nation’s gross domestic product by 0.6 percentage point in 2013.

Economic growth will cool to a 1.5 percent annualized pace in the second quarter after growing at a 2.5 percent pace in the prior three months, according to a Bloomberg survey of economists from April 5 to April 9.

Executives at staffing firm Kforce Inc. said they saw the impacts of sequestration rippling through their business. The Tampa, Florida-based company earlier this week reported first- quarter revenues that were lower than a year ago.

“The sequestration was an issue to us,” Chief Executive Officer David Dunkel said during an April 30 earnings call. “Frankly, we didn’t expect to see the ripple effect to commercial clients that we’re doing business with, with other government clients, subcontract business, and even state and local business.”

The government spending cuts could lead to 400,000 to 600,000 job losses and another 1.5 million furloughs this year, according to Bank of America Corp.’s Joshua Dennerlein. The cuts should begin to escalate in June and July and could affect the manufacturing and professional and business service industries, the New York-based economist said.