U.S. job growth accelerated sharply in May and wages picked up, signs of strong momentum in the economy that bolster prospects for a Federal Reserve interest rate hike in September.

    Nonfarm payrolls increased 280,000 last month, the largest gain since December, the Labor Department said Friday.

    While the unemployment rate rose to 5.5 percent from a near seven-year low of 5.4 percent in April, that was because more people, including new college graduates, entered the labor force, indicating confidence in the jobs market.

    “Today’s strong jobs report shows that the underlying trend in the economy is continuing to improve. This leaves the Fed on course to start hiking rates in September,” said Michelle Meyer, senior economist at Bank of America Merrill Lynch in New York.

    The report joined May automobile sales and manufacturing data in suggesting economic activity was gaining traction after a slow start in the second quarter.

    Doubts had sprung up in financial markets over whether the Fed would be able to raise rates this year after a first-quarter contraction in GDP and a string of weak data in April, including soft figures on consumer spending and industrial production.

    The jobs data helped dispel those doubts. The dollar raced to a 13-year peak versus the yen and surged against the euro. Prices for U.S. government debt fell sharply, with the yield on the two-year note rising to a more than four-year high.

    Average hourly earnings, which had long been the missing piece in the jobs recovery and one closely watched by Fed policymakers, rose eights cents. In addition, payrolls for March and April were revised to show 32,000 more jobs created than previously reported, giving the report a healthy glow.

    (SD-Agencies)