US labour market flexes muscles in February, unemployment falls to 6 1/2 year low

WASHINGTON (REUTERS) - US employment accelerated in February and the jobless rate fell to a more than 6-1/2 year low of 5.5 per cent, signs that could encourage the Federal Reserve to consider hiking interest rates in June.

Nonfarm payrolls rose 295,000 last month after rising 239,000 in January, the Labour Department said on Friday. The decline in the unemployment rate from 5.7 per cent in January took it to its lowest level since May 2008.The data suggested the U.S job market continued to strengthen, although the drop in the jobless rate largely reflected people leaving the labour force. Average hourly earnings rose by three cents last month.

Economists polled by Reuters had forecast a 240,000 increase in payrolls after a previously reported 257,000 rise in January. They had forecast the jobless rate falling one-tenth of a percentage point to 5.6 per cent.

Fed officials are monitoring pay closely to help determine when enough pressure has built in the jobs market to merit higher borrowing costs to keep the economy from overheating.

The closely followed employment report was released a little more than a week before the US central bank's March 17-18 policy meeting. Many economists expect the Fed could signal its openness to a June interest rate lift-off by dropping a pledge to be "patient" in considering a hike.