WASHINGTON (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 close to 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.

Labor market resilience gives the Federal Reserve 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 last month after a previously reported 228,000 advance in March. Estimates ranged from 25,000 to 195,000 jobs added.

The survey of establishments also showed February's payrolls count was revised down by 15,000 jobs to 102,000.

The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. The household survey from which the unemployment rate is derived showed employment increased 436,000, absorbing most of the 518,000 people who entered the labor force.

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.

Financial activities payrolls rose 14,000, while social assistance employment increased 8,000 and government hiring overall rose 10,000. 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 court 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.

The dollar fell against a basket of currencies. U.S. Treasury yields rose.

MANUFACTURING PAYROLLS FALL

Manufacturing payrolls declined, reflecting the strain from the tariffs. Trump's "Liberation Day" tariff announcement ushered in sweeping duties on most imports from the United States' trade partners, including boosting duties on Chinese goods to 145%, sparking a trade war with Beijing and tightening financial conditions.

Trump later delayed higher reciprocal tariffs for 90 days, which economists said was essentially a pause on the whole economy as it left businesses in a state of paralysis and risked a recession if there was no clarity soon.

The labor market continues to show resilience amid a reluctance by employers to let go of workers after struggling to find labor during and after the COVID-19 pandemic, but warning signs are accumulating.

Business sentiment continues to plummet, which economists expect will at some point give way to layoffs. Already, airlines have pulled their 2025 financial forecasts, citing uncertainty over spending on nonessential travel because of tariffs.

General Motors cut its 2025 profit forecast on Thursday and said it expected a $4-$5 billion tariff hit.

China has ordered its airlines not to take further deliveries of Boeing planes. Ryanair, 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.

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.

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.