State and local governments shed 3,000 jobs last month, while the economy overall added 165,000 jobs, according to the Labor Department. Economists say many local governments are reluctant to hire because of steadily growing pension costs and weak revenues, although some said they were surprised the April jobs report didn't reflect stronger government hiring. "I am surprised that state and local government spending is still declining on a real basis," Moody's Analytics chief economist Mark Zandi said.

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