By Lucia Mutikani

WASHINGTON (Reuters) - U.S. employment likely rose again in April, but a rush of job seekers into the labor market should keep wage gains moderate and buy a cautious Federal Reserve more time before raising interest rates again.

Nonfarm payrolls probably increased by 202,000 last month in U.S. Labor Department data due for publication on Friday, after growing by 215,000 in March, according to a Reuters survey of economists.

The unemployment rate is forecast to have held at 5.0 percent as improving labor market conditions lured some previously discouraged job seekers back into the workforce.

Job market strength would reinforce that view that the economy remains healthy, despite growth slowing sharply in the first quarter this year, but the influx of jobseekers may support Federal Reserve Chair Janet Yellen’s argument that there is still some slack in labor market.

“On the margin, the rise in the participation rate probably slows both the growth rate in wages and the Fed, but the reality is that, generally speaking, wage and price inflation has shown some signs of turning and picking up,” said Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York.

Average hourly earnings are forecast to rise 0.3 percent in April after a similar gain in March. That would take the year-on-year increase to 2.4 percent from 2.3 percent in March, still below the 3.0 percent advance that economists say is needed for inflation to rise to the Fed’s 2.0 percent target.

The U.S. central bank last month offered a fairly upbeat assessment of the labor market, saying that conditions had “improved further.”

The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year.

Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed’s June 14-15 meeting, according to CME Group’s FedWatch. They see a less than 50 percent probability of rate hikes in September and November, with a 59 percent chance at the December meeting.

SWELLING LABOR FORCE

“I am seeing one rate hike this year and I don’t think it will be in June,” said Dan North, chief economist at Euler Hermes North America in Baltimore.

“While employment growth has been good, there is still quite a bit of slack in the labor market. People are finally coming back in off the sidelines,” he said.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, has increased 0.6 percentage points since dipping to 62.4 percent in September and gains have been across all age groups.

About 2.4 million people have entered or re-entered the job market since September last year, the second-largest increase in the labor force over a six-month period on record.

The vast private services sector likely dominated employment gains in April. Manufacturing is expected to have shed another 5,000 jobs last month after losing 29,000 in March, the biggest loss for the sector since December 2009.

Further job losses are likely in mining as the energy sector adjusts to weak profits from a recent prolonged plunge in oil prices. Mining payrolls have decreased by 185,000 jobs since peaking in September 2014, with 75 percent of the losses in support activities.

Construction employment is expected to have slowed after nine straight months of gains, with home building showing some signs of fatigue in April. Retail payrolls are forecast to have also slowed down after averaging 60,433 per month in the first quarter, despite sluggish sales.

(Reporting by Lucia Mutikani; editing by Clive McKeef)