THE U.S. economy created more jobs than expected in June, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases this year.

Nonfarm payrolls rose by 213,000 jobs last month as manufacturers stepped up hiring, the U.S. Labor Department said Friday. The economy added 37,000 more jobs in April and May than previously reported. It needs to create about 120,000 jobs per month to keep up with growth in the working-age population.

“Overall the report is good news insofar as it suggests the economy still has some capacity to grow at an above-trend pace without generating much inflationary pressure,” said Michael Feroli, an economist at JP Morgan in New York.

“Similarly, it should ease the concerns of the hawks (at the Fed) who worry that the Fed’s rate hike campaign is behind the curve.”

The report showed strength in the economy before a trade war started between the United States and China, which analysts warned could slow hiring, especially in the manufacturing sector.

Washington is also engaged in fights with other major trade partners, including Canada, Mexico and the European Union after President Donald Trump imposed tariffs on steel and aluminum imports. Trump argues that the duties are necessary to protect domestic industries from what he says is unfair competition from foreign manufacturers.

Economists have warned the tit-for-tat tariffs could disrupt the supply chain, undermine business investment and raise prices for consumers, and wipe out the stimulus from a US$1.5 trillion tax cut package that came into effect in January.

The unemployment rate rose to 4 percent in June from an 18-year low of 3.8 percent in May as 601,000 job seekers entered the labor force in a sign of confidence in the labor market. That was the first increase in the jobless rate in 10 months.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in May. It had declined for three straight months.

Average hourly earnings gained 5 U.S. cents, or 0.2 percent in June after increasing 0.3 percent in May. That kept the annual increase in average hourly earnings at 2.7 percent. But with a record 6.7 million unfilled jobs in April, economists are confident that wage growth will accelerate later this year.

June’s moderate wage growth should, for now, allay fears of the economy overheating.

The Fed’s preferred inflation measure hit the central bank’s 2 percent target in May for the first time in six years. Economists expect inflation will hover around its target because of labor market tightness.

(SD-Agencies)