WASHINGTON (MarketWatch) — The pace of U.S. hiring partly snapped back in April after a surprising dip in March, suggesting that job creation is holding steady despite a raft of signs pointing to a third straight midyear slowdown in the economy.

The U.S. created a net 165,000 jobs in April and the hiring was stronger in March and February than initially reported, the Labor Department said Friday. The figures are seasonally adjusted

The increase in jobs exceeded the 135,000 forecast of economists polled by MarketWatch. In market action, U.S. stocks rallied after the report.

“It’s a heck of a lot better than other economic indicators were suggesting,” said Jennifer Lee, senior economist at BMO Capital Markets.

The acceleration in hiring also nudged the unemployment rate down to 7.5% from 7.6% in March. That’s the lowest level since December 2008, the month before President Obama took office.

The unemployment rate fell even though the size of the labor force increased, which is a good sign. People enter the labor force when they think there’s a better chance of finding work.

What’s more, the economy created 114,000 additional jobs in March and February than initially estimated. The number of new jobs created in March was revised up to 138,000 from 88,000, while February’s figure was revised up to 332,000 from 268,000.

The burst of job growth in February was the biggest since November 2005 for any month that did not include temporary Census bureau hiring.

Yet despite an improved labor market in April, companies are not hiring as many workers as they were just a few months ago and most economists think job growth will remain soft. Among the reasons: cuts in federal spending will accelerate and consumers are expected to feel a sharper bite from higher tax rates imposed in January.

“We still see a slowdown coming in the next couple of months,” Lee said. Economists polled by MarketWatch predict U.S. growth will slip to 1.5% in the second quarter from 2.5% in the first three months of the year.

The unemployment rate, for its part, won’t shrink rapidly unless companies hire at a speedier clip. The U.S. needs to average around 250,000 jobs a month for an extended period to tug the jobless rate back down to precessions levels of under 6%.

The pace of hiring in April is far too slow to accomplish that task.

Inside the report

All the hiring in April took place in the private sector, which added 176,000 jobs. Professional services added 73,000 workers; bars and restaurants hired 38,000 people; and the retail business generated 29,000 jobs.

Yet nearly one of every five new workers hired in April took jobs as temps, indicating that companies are still reluctant to add permanent employees. The economy won’t truly be ready to take off until temporary work leads more regularly to full-time jobs.

More reliance on temps also contributed to a decline in the amount of time people put in on the job. The average workweek fell two ticks to 34.4 hours and potentially reflected a dark underside to the April jobs report.

How we really read job ads

One of the few industries to cut employment was construction: 6,000 jobs were eliminated, mainly in nonresidential trades.

Yet home builders actually added workers last month to keep up with rising demand for new properties.

The government also extinguished 11,000 positions, marking the sixth decline in the past seven months.

Governments have cut half-million jobs in the past five years and the onset in March of billions of dollars in spending cuts under a law known as the sequester could also dampen employment. Some agencies are leaving open positions unfilled or are relying less on contractors.

Evidence of the sequester was expected to start to show up in April, but there was little evidence. “Outside of defense, I don't think we have seen a lot of impact,” said Frank Friedman, chief financial officer of the global business consulting firm Deloitte.

Still, economists say reduced federal spending could act as a drag on hiring and U.S. growth through the summer. And a host of recent reports appear to support the view growth has softened after a fast start to 2013.

Yet job growth isn’t likely to evaporate, economists say. One reason: employees are already working long hours. Companies won’t be able keep increasing production unless they add more staff.

What might also entice companies to beef up is slow and stable wage growth. Hourly earnings edged up 4 cents in April to $23.87, but they’ve risen only 1.9% over the past 12 months.

On the other hand, inflation has largely eaten up the wage gains of workers, leaving them little extra purchasing power. Unless Americans are able to buy more goods and services, businesses are unlikely to see the kind of demand that would spur them to rapidly pad their payrolls.

The sluggish pace of hiring since the end of the Great Recession in mid-2009 is a big reason why the U.S. is expanding at a rate well below the norm at this stage of a recovery. The unemployment rate is an even larger 13.9%, up from 13.8% in March, if everyone who wants a full-time job but can’t find one is included.

What’s worse, some 4.4 million people have been unable to find a job in the past six months, a number that’s still quite high by historically standards. The longer those people stay out of work the more their skills erode, making them less attractive to employers.

Efforts by U.S. lawmakers and the Federal Reserve have been unable to make a big dent in the number of long-term unemployed.