Adds details from report, analyst comments throughout

By Lucia Mutikani

WASHINGTON, May 2 (Reuters) - U.S. job growth slowed marginally in April and employers continued to hoard workers, but the outlook for the labor market is increasingly darkening as President Donald Trump's protectionist trade policy heightens economic uncertainty.

The Labor Department's closely watched employment report published on Friday, which also showed the unemployment rate held steady at 4.2% last month, helped to assuage fears that the economy was nearing recession after gross domestic product contracted in the first quarter amid a tariff-induced flood of imports. Nonetheless, it is too early for the labor market to show the impact of Trump's on-and-off again tariff policy.

Posting on his Truth Social media platform, Trump renewed his call for the Federal Reserve to "LOWER ITS RATE!!!" In the midst of the swirling uncertainty, labor market resilience gives the U.S. central bank cover to keep its benchmark overnight interest rate in the 4.25%-4.50% range next week.

"The 'R' word that the labor market is demonstrating in this report is resilience, certainly not recession," said Olu Sonola, head of U.S. economic research at Fitch Ratings. "For now, we should curb our enthusiasm going forward given the backdrop of trade policies that will likely be a drag on the economy."

Nonfarm payrolls increased by 177,000 jobs last month after rising by a downwardly revised 185,000 in March, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast 130,000 jobs added after a previously reported 228,000 advance in March.

The survey of establishments also showed February's payrolls count was revised down by 15,000 jobs to 102,000. The cumulative 58,000 downgrade for the prior two months left April's payrolls gain close to expectations.

The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.

Healthcare continued to dominate job growth, adding 51,000 positions across hospitals and ambulatory services.

Transportation and warehousing employment increased by 29,000, mostly warehousing and storage, couriers and messengers as well as air transportation, reflecting the deluge of imports in the first quarter as businesses sought to get ahead of duties.

Financial activities payrolls rose 14,000, while social assistance employment increased 8,000 and government hiring overall rose 10,000. Construction payrolls advanced 11,000 and hiring in the leisure and hospitality industry increased 24,000, with most of the jobs at restaurants and bars.

But federal government employment declined 9,000 and is down 26,000 since January amid the Trump administration's unprecedented and often chaotic campaign spearheaded by tech billionaire Elon Musk's Department of Government Efficiency, or DOGE, to drastically shrink the government.

Despite news headlines of mass firings at government agencies, the decline in federal payrolls has been relatively modest. That is because fired employees who have been reinstated by courts and subsequently put on paid leave are counted as employed. The same applies to those who have accepted buyout offers. Economists expect federal payrolls to drop significantly after September, when severance pay runs out for many.

Manufacturing payrolls decreased 1,000 amid declines in employment at motor vehicle assembly plants as well as computer and electronic products factories. The drop in factory jobs is likely to accelerate.

Though Trump this week softened duties on imported auto parts, Anderson Economic Group estimated automakers will still face a $2,000 to $12,000 tariff hit per vehicle. General Motors GM.N cut its 2025 profit forecast on Thursday and said it expected a $4 billion to $5 billion tariff drag.

The White House boosted tariffs on Chinese goods to 145%, sparking a trade war with Beijing. China has ordered its airlines not to take further deliveries of Boeing BA.N planes. Ryanair RYA.I, Europe's largest low-cost carrier, on Thursday threatened to cancel orders for hundreds of Boeing aircraft if the tariff war leads to materially higher prices.

Stocks on Wall Street traded higher. The dollar fell against a basket of currencies. U.S. Treasury yields rose.

With the labor market resilience mostly because of a reluctance by employers to let go of workers after struggling to find labor during and after the COVID-19 pandemic, some economists argue the employment report is probably no longer a good leading indicator of the underlying state of the economy.

They point to deteriorating business sentiment and companies either pulling their 2025 financial forecasts or offering light earnings guidance for the second quarter as signs of a looming sharp labor market slowdown.

Surveys, including from the Institute for Supply Management, the Conference Board and University of Michigan, have uniformly painted a bleak economic picture. Most economists anticipate the tariff drag could become evident by summer in the so-called hard data, including employment and inflation reports.

"Depending of course on how events play out, the most likely trajectory for the economy is that the worst period will be the summer, by which time the full impact of the tariffs imposed in April will likely have set in," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

For now the labor market is holding up. The average workweek was unchanged at an upwardly revised 34.3 hours in April. The workweek was previously reported to have averaged 34.2 hours in March. Economists expect businesses will reduce hours first before embarking on mass layoffs.

Average hourly earnings rose 0.2% after gaining 0.3% in March. That left the annual increase in wages unchanged at 3.8% in April, enough to support consumer spending and the economy for now. The household survey from which the unemployment rate is derived showed strength and also some red flags.

Household employment increased 436,000, absorbing most of the 518,000 people who entered the labor force. Fewer people worked part-time for economic reasons.

But more people are experiencing long bouts of joblessness. The median duration of unemployment increased to 10.4 weeks, among the highest since the pandemic, from 9.8 weeks in March. The number of workers with multiple jobs increased.

"If the labor market holds up and the Trump administration walks back the most egregious tariffs, the economy could skirt a deep recession," said Jeffrey Roach, chief economist at LPL Financial.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com))