U.S. employers created only 110,000 new jobs in March, the smallest gain in eight months and barely half the 220,000 that Wall Street economists had forecast, as manufacturers and retailers shed workers.

Nevertheless, the labor market was healthy enough to lower the overall unemployment rate to 5.2 percent.

The new figures, released by the Labor Department (search ) Friday, offered another mixed picture of America's hiring climate. The job market has been the sector of the economy that has been among the slowest to recover from the last recession.

The last month in which there were fewer new jobs than in March was July last year, when only 83,000 were created. Job gains for February, meanwhile, were revised slightly downward to 243,000 from the initial 262,000 reported a month ago.

Payroll growth, as measured by a survey of businesses, slowed in March. Job losses at factories and in the retail sector tempered gains in professional and business services, construction, education and health services and in other industries.

The civilian U.S. unemployment rate is calculated from a separate statistical survey than the payroll figures. The two statistical methods often can — and do — offer seemingly conflicting pictures of what is happening in the labor market.

The seasonally adjusted overall civilian unemployment rate (search) dropped to 5.2 percent in March from 5.4 percent in February. The household survey showed that 357,000 people said they found employment last month, outpacing the number of people who couldn't find work. Thus, the fractional decrease in the overall jobless rate.

The latest data is likely to further allay concerns about potential inflationary overheating in the economy but it may also fan concerns about the durability of the expansion, especially with oil prices continuing at lofty levels.

Analysts said it would soften concerns that inflation, which generally results not only from higher prices but also wage demands, might be taking root in the economy.

"This will make people believe that perhaps the economy is not as prone to a rise in inflation this year as they were worried about a few weeks ago," said economist Kevin Logan of Dresdner Kleinwort Wasserstein in New York.

The Federal Reserve (search) has been on a rate-rising campaign since June last year, pushing its bellwether federal funds rate up seven times successively by a quarter-percentage point at a time to 2.75 percent. It has cited some concern over renewed evidence of pricing pressure.

The employment report showed the average workweek for all industries held steady at 33.7 hours but, within the factory sector alone, both the average workweek and overtime hours shrank slightly in March. Employers generally increase the workweek before they add new employees.

The participation rate, the proportion of the population that either has a job or is looking for a job, remained at a 17-year low of 65.8 percent.

Average hourly earnings were up 4 cents from February to $15.95.

Manufacturing industries dropped 8,000 employees in March, after adding 15,000 in February. The head of the Labor Department's Bureau of Labor Statistics, Kathleen Utgoff, noted that, on net, the number of U.S. factory jobs is down slightly since last summer.

The service sector, which has been the jobs-creating powerhouse, generated only 86,000 jobs in March, less than half the 191,000 that were created in February and the smallest for any month since last July when 71,000 jobs were added. Within the services sector, 9,700 retail jobs were lost last month, a sharp turnaround from February when retailers added 39,100 employees.

Reuters and the Associated Press contributed to this report.