The US economy added a surprisingly strong 167,000 jobs in December, according to a government report today showing a jump in pay that may fan concerns by policy-makers who fear a strong job market could ignite inflation.
The Labor Department also revised hiring up for each of the two prior months from previous estimates. The unemployment rate in December was 4.5 per cent, unchanged from November.
Wall Street economists had forecast that only 100,000 new jobs would be created in December, so the report painted a picture of a substantially healthier job market than anticipated as 2006 ended.
US Treasury debt prices fell on the strong report, while the dollar extended gains against the euro as traders raised their bets that the Fed will keep rates on hold at least through March. US stock futures were little changed.
Some analysts said growth estimates might have to be revised up because it appeared the overall economy had more underlying durability.
"It's certainly going to go a long way in calming fears that a housing slowdown was taking the economy apart," said Jim Paulsen, chief investment officer for Wells Capital Management in Minneapolis. "Its going to lead to revisions upward, not only in fourth-quarter GDP but also first-quarter" gross domestic product.
All the new hiring since September has been in service industries while goods producers have cut jobs in each of the four months. In December, there were 178,000 more jobs added in service businesses while goods producers shed 11,000.
The department revised up November hiring to show 154,000 new jobs instead of 132,000 that it reported a month ago and it said there were 86,000 new jobs in October instead of 79,000.
Some parts of the report will trouble Fed policy-makers, who have expressed concern about potential inflation. Average hourly earnings climbed 0.5 per cent in December - the largest monthly increase since a 0.6 per cent jump in April - after a 0.3 percent gain in November.
Average hourly earnings on a year-over-year seasonally adjusted basis rose 4.2 per cent in both November and December. Those were highest gains for any 12-month period since a matching 4.2 per cent in February 2001.