By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth increased at its fastest pace in more than two years in April and the unemployment rate dived to a 5-1/2 year low of 6.3 percent, suggesting a sharp rebound in economic activity early in the second quarter.
Non-farm payrolls surged 288,000 last month, the Labor Department said on Friday. That was the largest gain since January 2012 and beat Wall Street's expectations for only a 210,000 increase.
The unemployment rate tumbled 0.4 percentage point, touching its lowest level since September 2008. The Labor Department attributed the decline to a drop in the number of unemployed people reentering the labour market as well as a fall in new entrants into the labour force.
The economy stalled in the first quarter, weighed down by an unusually cold and disruptive winter. A slow pace of stock accumulation by businesses, while they work through a glut of goods amassed in the second half of 2013, also undercut growth.
The employment report joins other upbeat data such as consumer spending and industrial production in suggesting the first quarter's 0.1 percent annual growth pace was an aberration and is not a reflection of the economy's otherwise sound fundamentals.
The Federal Reserve on Wednesday shrugged off the dismal performance. The U.S. central bank, which announced further reductions to the amount of money it is pumping into the economy through monthly bond purchases, said indications were that "growth in economic activity has picked up recently."
Economists expect second-quarter growth to top a 3 percent pace.
While details of the bigger survey of employers were upbeat, the smaller and volatile household survey from which the unemployment rate is calculated was mixed.
Household employment fell slightly after increasing robustly in the first quarter. The labour force, which also grew during the same period as improving job prospects encouraged some job seekers who had given up the hunt to resume looking for work, declined sharply in April.
The labour force participation rate, or the share of working-age Americans who are employed and unemployed but looking for a job, fell 0.4 percentage point to 62.8 percent. That was the lowest level since last December.
Some of the 1.35 million people who lost their longer-term unemployment benefits at the end of last December could have dropped out the labour force last month.
The participation rate and the persistently high number of Americans out of work for long spells could keep the Fed from lifting interest rates for some time to come.
April job gains were broad based. Government payrolls rose by 15,000. Manufacturing employment increased 12,000. Construction payrolls gained 32,000, but the hiring trend could slow in the months ahead as residential construction loses some steam.
Average hourly earnings were flat in April. The length of the workweek held steady at 34.5 hours in April after bouncing back in March from its winter-depressed levels.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)