U.S. job growth increased more than expected in February and wages rose steadily, which could give the Federal Reserve the green light to raise interest rates next week despite slowing economic growth.
Nonfarm payrolls rose 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. The economy created 9,000 more jobs in December and January than previously reported.
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 entered the labor market, encouraged by the hiring spree. Economists polled by Reuters had forecast employment increasing by 190,000 jobs last month.
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. According to economists, wage growth of between 3 percent and 3.5 percent is needed to lift inflation to the Fed's 2 percent target. But inflation is already firming, in part as commodity prices rise.
All sectors of the economy, with the exception of retail and utilities, expanded payrolls in February. Manufacturing employment increased 28,000, the largest increase since August 2013, as rising oil prices fan demand for machinery. Construction payrolls surged 58,000, the biggest gain since March 2007, boosted by warmer weather. Retail sector employment fell 26,000 after a gain of 39,900 jobs in January.