U.S. job growth rebounds sharply, unemployment rate falls to 4.4 pct

WASHINGTON, (Reuters) - U.S. job growth rebounded sharply in April and the unemployment rate dropped to 4.4 percent, near a 10-year low, pointing to a tightening labour market that likely seals the case for an interest rate increase next month despite moderate wage growth.

Nonfarm payrolls surged by 211,000 jobs last month after a paltry gain of 79,000 in March, the Labor Department said yesterday. April’s job growth, which was broad-based, surpassed this year’s monthly average of 185,000.

There were hefty increases in leisure and hospitality, healthcare and social assistance as well as business and professional services payrolls.

The drop of one-tenth of a percentage point in the jobless rate took it to its lowest level since May 2007 and well below the most recent Federal Reserve median forecast for full employment.

“These developments should keep the Fed firmly on track to hike rates again in June and should motivate a hawkish shift in the interest rate forecasts they will release at that meeting,” said Michael Feroli, an economist at JPMorgan in New York.

The hiring rebound supports the U.S. central bank’s contention that the pedestrian 0.7 percent annualized economic growth pace in the first quarter was likely “transitory,” and its optimism that economic activity would expand at a “moderate” pace.

The Fed on Wednesday kept its benchmark overnight interest rate unchanged and said it expected labor market conditions would “strengthen somewhat further.” It raised rates by a quarter of a percentage point in March and has forecast two more increases this year.

Financial markets are pricing in a roughly 83 percent probability of a 25-basis-point rate increase at the Fed’s June 13-14 policy meeting, according to CME Group’s FedWatch program.