WASHINGTON (REUTERS) - US employment increased less than expected in December but a rebound in wages pointed to sustained labour market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.
Nonfarm payrolls increased by 156,000 jobs last month, the Labor Department said Friday. The gains, however, still remain above a level that is considered sufficient to absorb new entrants into the labor market.
October and November's data was revised to show 19,000 more jobs added than previously reported. The economy created 2.16 million jobs in 2016.
Average hourly earnings increased 10 US cents (14.3 Singapore cents) or 0.4 per cent, benefiting from a calendar quirk, after slipping 0.1 per cent in November.
That pushed the year-on-year increase in average hourly earnings to 2.9 per cent, the largest increase since June 2009, from 2.5 per cent in November.
The unemployment rate ticked up to 4.7 per cent from a nine-year low of 4.6 per cent in November as more people entered the labour force, a sign of confidence in the jobs market.
The employment report added to data ranging from housing to manufacturing and auto sales in suggesting that President-elect Donald Trump is inheriting a strong economy from the Obama administration.
Mr Trump, who takes over on Jan. 20, has pledged to increase spending on the country's aging infrastructure, cut taxes and relax regulations. These measures are expected to boost growth this year.
But the proposed expansionary fiscal policy stance could increase the budget deficit. That, together with faster economic growth and a labour market that is expected to hit full employment this year could raise concerns about the Fed falling behind the curve on interest rate increases.
The US central bank raised its benchmark overnight interest rate last month by 25 basis points to a range of 0.50 per cent to 0.75 per cent. The Fed forecast three rate hikes this year.
Employment growth in 2016 averaged 180,000 jobs per month, down from an average gain of 229,000 per month in 2015. The slowdown in job growth is consistent with a labour market that is near full employment.
There has been an increase in employers saying they cannot fill vacant positions because they cannot find qualified workers. The skills shortage has been prominent in the construction industry.
Even as the labour market tightens, there still remains some slack, which is holding back wage growth. The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose one-tenth of percentage point to 62.7 per cent in December.