US job growth has surged in February, recording its biggest increase in more than one-and-a-half years, but a slowdown in wage gains pointed to only a gradual increase in inflation this year.
Nonfarm payrolls jumped by 313,000 jobs last month, boosted by the largest rise in construction jobs since 2007, the Labor Department said on Friday.
The payrolls gain was the biggest since July 2016 and triple the roughly 100,000 jobs the economy needs to create each month to keep up with growth in the working-age population.
The labour market is benefiting from strong domestic demand, an improvement in global growth as well as robust US business sentiment following the Trump administration's $1.5 trillion income tax cut package that come into effect in January.
Average hourly earnings edged up four cents, or 0.1 per cent, to $US26.75 in February, a slowdown from the 0.3 per cent rise in January.
That lowered the year-on-year increase in average hourly earnings to 2.6 per cent from 2.8 per cent in January.
The unemployment rate was unchanged at a 17-year low of 4.1 per cent in February for a fifth straight month as 806,000 people entered the labour force in a sign of confidence in the job market.
The average workweek rebounded to 34.5 hours after falling to 34.4 hours in January.
With Federal Reserve officials considering the labour market to be near or a little beyond full employment, the moderation in wage growth last month did little to change the view that the US central bank will raise interest rates at its March 20-21 policy meeting.
Slow wage growth, however, could temper expectations the Fed will raise its rate forecast to four hikes this year from three.
There is optimism that tightening labour market conditions will spur faster wage growth this year and pull inflation toward the Fed's two per cent target.
"While the employment gains unequivocally suggest underlying strength in the economy, wage gains remain muted enough for the Fed to continue with an only gradual normalization of the policy stance. Stock markets are reacting accordingly," said Harm Bandholz, chief US economist at UniCredit Bank in New York.
Speculation that the central bank would upgrade its rate projections was stoked by Fed Chairman Jerome Powell when he told lawmakers last week that "my personal outlook for the economy has strengthened since December".
While Powell said there was no evidence of the economy overheating, he added "the thing we don't want to have happen is to get behind the curve".
Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month and the unemployment rate falling to 4 per cent. Average hourly earnings had been expected to increase 0.2 per cent in February.
Data for December and January was revised to show the economy adding 54,000 more jobs than previously reported.
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