Employers in the United States added 288,000 jobs to their payrolls in April as the U.S. unemployment rate slipped to 5.6%, reinforcing hopes for a sustained turnaround in the jobs market that had lagged for so long.

Payrolls have risen now for eight straight months, with 867,000 new jobs created so far this year, the U.S. Labor Department reported today.

Hiring was widespread last month, with the service sector leading the way. Professional and business services employment rose substantially, by 123,000.

In that category, gains were in employment services, including temporary help firms, services to buildings and dwellings, management and technical consulting services and architectural and engineering services.

CIBC World Markets says that these strong results hint that Q2 GDP growth could beat its already-high 5.2% forecast. “If this continues into May/June, the upside surprises in job counts could lift our call for second half growth in the 3% range. As for fixed income markets, we were anticipating some pressure on markets between now and the June FOMC meeting, but these data have obviously opened up risks of a more significant sell-off in that period.”

“All in all, the net number of new jobs created since the start of the year now stands at 867,000 – or, about 217,000 jobs per month, on average. This impressive performance makes the recent fears of a ‘jobless recovery’ seem distant, indeed, and strengthens our conviction that the U.S. Federal Reserve will begin rebalancing monetary policy this August,” TD Bank says.

“Employment prospects are no longer clouding an otherwise bright economic outlook,” Nesbitt says. “A summer rate hike is now all but certain, and the risk of an earlier June move (as opposed to August) is rising. Another similarly strong payroll report might be all that it will take.”

HSBC says its long-held view that the Fed would not raise rates in 2004 is wrong. “As a result of the recent economic evidence, we are changing our end-2004 Fed funds forecast to 1.75% from 1%, and we are shifting ourend-2005 Fed funds call to 3% from 2%.”

“Equities continue to see good news as bad news, fearing rate hikes more than the improvement in the earnings outlook associated with more rapid growth. That’s a sentiment that, like the bond market’s bearishness, isn’t likely to change before the Fed’s next meeting,” CIBC says. “Both markets are overdoing the extent to which the Fed will be clamping down on growth through interest rate hikes, given that core inflation is so muted.”