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Update: US adds 313,000 jobs in February; wage growth misses expectations

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Update: US adds 313,000 jobs in February; wage growth misses expectations

U.S. nonfarm payroll employment showed surprising strength in February, but disappointing wage growth tempered market expectations that the Federal Reserve would raise interest rates more than three times in 2018.

Employment increased by 313,000 in February from January, well above Econoday's consensus estimate of 205,000. The unemployment rate remained unchanged at 4.1%; a decline to 4.0% was expected.

Stocks rose on the report, while bonds fell. The S&P 500 Index gained 0.67% to 2,756.89 and the Nasdaq Composite Index rose 0.71% to 7,480.58 by 9:55 a.m. ET. Yields on the benchmark U.S. Treasury rose to 2.900%. Bond prices fall as yields rise.

Average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.75 and by 68 cents over the year. The 2.6% year-over-year rise in wage growth was below expectations and down from the revised 2.8% increase in January.

Total private payrolls increased by 287,000 in February after rising by 238,000 in January. Employment increased in construction, retail trade, professional and business services, manufacturing, financial activities, and mining.

The number of workers employed part-time for economic reasons increased to 5.2 million from 5.0 million. Individuals marginally attached to the labor force, those who want and have searched for a job during the past 12 months but did not search for it in the prior 4 weeks, declined to 1.6 million from 1.7 million a year earlier.

The U-6 unemployment rate, which includes individuals marginally attached to the labor force and those employed part-time for economic reasons, remained unchanged at 8.2% in February after edging up in the previous two months, indicating additional slack in the labor market.

"This would suggest that those calls for four rate rises this year may well be a little bit premature, particularly when you see the participation rate jump from 62.7% to 63%, as more people return to the work force," said Michael Hewson, chief market analyst at CMC Markets UK. "This is likely to prompt a little bit of a brake on the US dollar rebound we've seen this week."

But some economists are still expecting four rate hikes in 2018. Data from other reports show that vacancies are taking longer to fill as both small and large businesses are struggling to find workers, said James Knightley, chief international economist at ING Research. "Consequently, we are a little skeptical of today's jobs report and instead we think payrolls growth will slow and wage growth will quicken in coming months."

The total number of jobs added in January was revised up to 239,000 from 200,000 and the change for December 2017 was revised up to 175,000 from 160,000, the Labor Department said.

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