US job creation beat forecasts in May, boosting hopes of a sustained economic recovery and cementing market expectations that the Federal Reserve will raise interest rates this month.

Non-farm payrolls climbed by 248,000 in May - above the 225,000 expected by economists. The figures also showed that 74,000 more jobs were created in March and April than had previously been thought, taking total job creation over the past three months to 947,000.

Economists said the growing strength of the labour market would help offset the damage to the economy from volatile oil prices and the prospect of higher interest rates.

"Clearly these numbers are strong enough to erase any doubt that there will be a tightening at the end of June," said FTN Financial chief economist Mr Chris Low.

The employment report for May was seen as the last major economic figure before the Fed's June meeting that could have changed expectations for a modest rate rise at that meeting.

After holding the official federal funds rate at 1 per cent - the lowest level since 1958 - since last June, the Fed has said it plans to start raising rates in a "measured" fashion now that the economy has gathered steam.

Fears are fading that the economy will run out of steam once the impact of tax cuts and mortgage refinancing has worked through the system this summer.

The figure also reduces the danger that Mr George W. Bush would be the first US leader since the Great Depression to preside over a net loss of jobs.

"Today's job report shows the American economy is strong and it is getting stronger," Mr Bush said in Rome.

Mr Marc Chandler, chief currency strategist at HSBC in New York, said markets believed that, despite the improving outlook, the Fed would be able to prevent a dangerous rise in inflation. The unemployment rate remained at 5.6 per cent, down from 6 per cent in October.