U.S. employment gains surged in February, the clearest sign yet of labor market strength that could further ease fears the economy was heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

    Nonfarm payrolls increased by 242,000 jobs last month and 30,000 more jobs were added in December and January than previously reported, the Labor Department said Friday. The unemployment rate held at an eight-year low of 4.9 percent even as more people piled into the labor market.

    “Despite panic on Wall Street about impending recession, Main Street goes about its business as usual. This report will get the Fed’s attention, and raises the odds of another rate hike before too long,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

    The only blemish in the report was a three-cent drop in average hourly earnings, which in part reflected a calendar quirk and the proliferation of low-paying retail and restaurant jobs. The average length of the workweek also fell last month.

    The employment report added to data such as consumer and business spending in suggesting the economy had regained momentum after growth slowed to a 1.0 percent annual rate in the fourth quarter.

    Growth estimates for the first quarter are around a 2.5 percent rate, but risks are tilted to the downside after a report from the Commerce Department on Friday showed the trade deficit widened 2.2 percent to US$45.7 billion in January.

    Economists had forecast employment increasing by 190,000 last month and the jobless rate holding steady.

    Though global financial markets have priced out bets of a rate hike at the Fed’s March 15-16 policy meeting, they now see a roughly 50 percent chance of an increase at the September and November meetings, according to CME FedWatch.

    But economists believe the strong job market and improved growth outlook, together with signs that inflation is creeping up, could prompt the U.S. central bank to lift borrowing costs in June.

    The Fed raised its key overnight interest rate in December for the first time in nearly a decade.

    “The lack of a more marked pickup in wage growth is the only missing element,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “But as far as the Fed is concerned, it is already seeing a clear acceleration in core price inflation. A June rate hike is coming.”

    (SD-Agencies)