The U.S. economy created 262,000 jobs last month, the biggest gain in four months and much more than Wall Street's forecast, as auto workers returned from temporary layoffs and construction activity snapped back from a cold January, the government said on Friday.

The unemployment rate (search), however, rose to 5.4 percent from January's 5.2 percent, but the gain partly reflected an increase in workers entering the labor force, the Labor Department (search) said.

The unemployment rate is calculated from a separate statistical survey than the payroll figures. Thus, they can offer somewhat different pictures of what is happening in the labor market.

The median forecast of Wall Street economists polled a week ago was for a nonfarm payroll gain of 220,000 jobs, but a big jump in a measure of service-sector employment released on Thursday led some financial market participants to brace for a stronger number. Forecasters had expected the jobless rate to hold steady.

The latest snapshot of the country's employment climate showed job gains across a range of industries -- from manufacturing and construction to retail and business services.

The report suggested that the labor market continues to be on the mend, but it still hasn't reached full health, analysts said.

"Indicators are showing some improvement in the labor market situation but we are nowhere near where we need to be," said Ken Mayland, president of ClearView Economics.

U.S. manufacturers added 20,000 workers to their payrolls in February, the biggest gain since August. The head of the Bureau of Labor Statistics (search), Kathleen Utgoff, said much of the gain reflected auto workers returning from temporary layoffs.

In addition, construction jobs shot up by 30,000 after holding steady in January. Utgoff said construction hiring in January was likely restrained by unusually severe weather.

For workers and jobseekers, it's still a somewhat difficult employment climate, analysts said.

Workers' average weekly earnings held steady in February at $535.83, unchanged from January's figure. There were 8 million people unemployed in February with the average duration of 19.1 weeks without work, down slightly from 19.3 weeks in January.

Meanwhile, the share of the working-age population working or actively seeking a job in February was 65.8 percent, unchanged from January when this figure sank to a nearly 17-year low.

In February, the nation's manufacturers added 20,000 positions. Employment growth in factories came after five previous months of job losses. Employment gains in the manufacturing of motor vehicles and parts accounted for about half of the gain, the government said.

Reuters and the Associated Press contributed to this report.