US job growth rebounded last month and the unemployment rate dropped to a near seven-year low of 5.4 per cent, signs of a pick-up in economic momentum that could keep the Federal Reserve on track to hike interest rates this year.

Non-farm payrolls increased 223,000 as gains in services sector and construction jobs offset weakness in mining, the Labor Department said.

The one-tenth of a percentage point decline in the unemployment rate to its lowest level since May 2008 came even as more people piled into the labour market.

While the report suggested underlying strength in the economy at the start of the second quarter after a bad stumble, wage growth was tepid and March payrolls were revised downward, leading financial markets to push back rate hike bets. “We see this report as reducing concerns that weak first-quarter growth represents a loss of economic momentum,” said Michael Gapen, chief US economist at Barclays in New York.

Nevertheless, he said the bounce-back was not strong enough to think the Fed could bump rates higher before September.

March payrolls were revised to show only 85,000 jobs created, the fewest since June 2012. – (Reuters)