U.S. employers hired workers at a robust pace in February, beating expectations, and wages grinded higher, which could give the Federal Reserve the green light to raise interest rates next week despite slowing economic growth, Reuters reported.
Nonfarm payrolls increased by 235,000 jobs last month as the construction sector recorded its largest gain in nearly 10 years due to unseasonably warm weather, the Labor Department said on Friday. February's employment gains were revised up to 238,000 from the previously reported 227,000.
Fed Chair Janet Yellen signaled last week that the U.S. central bank would likely hike rates at its March 14-15 policy meeting.
Job gains averaged 209,000 per month over the past three months, well above the 75,000 to 100,000 needed to keep up with growth in the working-age population.
"The report seals the deal for a rate hike next week. The labor market is where the Fed wants it to be," said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh.
Last month's brisk clip of hiring was accompanied by steady wage growth, with average hourly earnings rising 6 cents, or 0.2 percent. January's wage growth was revised up to 0.2 percent from the previous 0.1 percent gain. That lifted the year-on-year increase in wages to 2.8 percent from 2.6 percent in January.
The unemployment rate fell one-tenth of a percentage point to 4.7 percent, even as more people rushed into the labor market, encouraged by the hiring spree. Economists had forecast employment increasing by 190,000 jobs last month.
U.S. stocks climbed as investors cheered the report.
The dollar .DXY fell against a basket of currencies amid disappointment that wages were only growing gradually. The greenback was also hurt by news that the European Central Bank had discussed the possibility of raising interest rates before the end of its quantitative easing program.
Prices for U.S. government bonds rose, with the yield on the benchmark 10-year Treasury note retreating from a 12-week high.
With the labor market near full employment, wage growth could speed up as companies are forced to raise compensation to retain employees and attract skilled workers.
The annual wage increase is close to the 3 percent to 3.5 percent range that economists say is needed to lift inflation to the Fed's 2 percent target. Inflation is already firming, in part as commodity prices rise.
Rising inflation, together with a tighter labor market, stock market boom and strengthening global economy, has left some economists expecting that the Fed could increase rates much faster than is currently anticipated by financial markets.
The U.S. central bank lifted its benchmark overnight rate in December and has forecast three rate increases for 2017.