US employers in March added the fewest workers in nine months as the jobless rate fell to a four-year low with the share of Americans in the labor force slumping, marking a pause in the job-market recovery.

Payrolls grew by 88,000, less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 gain in February, Labor Department data showed in Friday in Washington. Unemployment dropped to 7.6 percent, the lowest since December 2008, from 7.7 percent.

The inability to sustain bigger gains in hiring and wages helps explain why the Federal Reserve is maintaining record monetary policy stimulus. Bond yields tumbled and stocks retreated as the report heightened concern that federal budget cuts will temper growth in the world's largest economy following a first-quarter pickup.

"We're still in the same slow-growth mode we've been in now for the past four years," said Mark Zandi, chief economist at Moody's Analytics Inc in West Chester, Pennsylvania. "The job market's going to slow but I don't think it's going to cave."

The Standard & Poor's 500 Index fell 0.4 percent to close at 1553.28 last week in New York. The yield on the benchmark 10-year Treasury note fell to 1.71 percent, the lowest level of 2013.

The median of 87 estimates in a Bloomberg survey called for a 190,000 advance in payrolls. Revisions added a total of 61,000 jobs to the employment count in January and February.

Some companies are struggling to survive with fewer workers. At Wal-Mart Stores Inc, merchandise is piling up in aisles and in the back of stores because the company doesn't have enough employees to keep shelves stocked, according to interviews with workers.

In the past five years, the world's largest retailer added 455 US Wal-Mart stores, a 13 percent increase, according to filings and the company's website. In the same period, its total US workforce, which includes Sam's Club employees, dropped by about 20,000, or 1.4 percent. Wal-Mart, based in Bentonville, Arkansas, employs about 1.4 million US workers.

"Most (US) American companies are still lean and mean," said Ethan Harris, co-head of global economics research at Bank of America Corp in New York. "They've been very disciplined about controlling their workforce, their spending and investment."

Retail payrolls slumped in March by the most since February 2012 and factory employment declined by 3,000, the first drop since September, Friday's report showed.

Among those having trouble finding work is Howie Appel, 65, who lost his position as a corporate recruiter at HNTB Corp in Lake Mary, Florida, in 2009. He has done several part-time jobs since then, he said.

Support group

One of his roles is helping others find jobs as executive director of ProNet Career Resources, an unemployment and under-employment support group he founded in 2003. Many of its members are baby boomers struggling to find opportunities as they compete with recent college graduates.

"It's a very, very slow comeback," Appel said. "We're hearing all over the place that there are openings. We're hearing it but not seeing it."

The unemployment rate, derived from a survey of households, was forecast to hold at 7.7 percent, according to the Bloomberg survey median. The March figure was accompanied by a 496,000 decline in the labor force.

The share of the working-age population in the labor force, known as the participation rate, fell to 63.3 percent, the lowest since May 1979. As the participation rate declines, it takes smaller gains in employment to push down the jobless rate. In March, the number of unemployed Americans fell to 11.7 million, the fewest since December 2008.

Budget cuts

Job-market progress slowed just as $85 billion in automatic across-the-board government budget cuts, known as sequestration, started on March 1. The reductions in planned spending, which began because Congress couldn't compromise on a debt-reduction strategy, trim 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.

"Sequestration is going to have an adverse effect" on the economy, Alan Krueger, chairman of the White House Council of Economic Advisers, said on Bloomberg Television. "That's one of the headwinds we're facing."

Krueger repeated US President Barack Obama's call to replace the cuts with a deficit-reduction package that includes raising more revenue from taxes in addition to reducing outlays. The United States needs to continue spending on infrastructure and education to ensure future growth, he said.

Former Treasury Secretary Lawrence Summers said he expects healthy economic growth in the US this year and next and doesn't see a "need to panic" over the employment report.

Summers, who directed Obama's National Economic Council for the administration's first two years, said the economy should expand this year at a rate "north of 2.5 percent". Next year, there's "a good chance for above 3 percent" growth, he said in an interview on Bloomberg Television's Political Capital with Al Hunt that aired over the weekend.