US job growth picked up last month as employers added 207,000 workers to their payrolls, a healthy gain that led Wall Street to increase bets on rate hikes from the Federal Reserve.
The unemployment rate held steady at the 5 per cent, the lowest level since September 2001, the US Labor Department said yesterday.
"This is a crystal clear indication that the labour markets are very healthy and it reinforces the notion that the economy is growing in a healthy, sustainable way," said Dana Johnson, chief economist at Comerica in Detroit.
The Fed, which has raised the benchmark overnight lending rate at each of its last nine meetings, is widely expected to bump it up another quarter-percentage point to 3.5 per cent when officials gather on Tuesday.
"The Fed is going to keep chugging along," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston.
Financial markets see the rate hitting 4 per cent by year end, although the jobs report had some betting it could move even higher.
The payrolls gain, spurred on by service-sector hiring, was stronger than expected by economists who had looked for an increase of 183,000 with the jobless rate steady.
Prices for US government bonds fell sharply on the data, pushing yields higher, the dollar strengthened and stock prices fell as markets braced for further Fed interest rate increases.
The Bush administration hailed the report as a sign of the economy's vigour.
"This shows that the fundamentals of our economy are strong and that we are continuing on a positive path of growth and prosperity," US treasury secretary John Snow said in a statement.
While some economists thought the report might be skewed by Hurricane Dennis, which battered the Florida panhandle in mid-July, the department said the storm appeared to have no discernible impact on the figures.
A net upward revision of 42,000 to the combined job count for May and June contributed to the report's solid tenor. US employers added 166,000 workers in June and 126,000 in May, a pace economists see as strong enough to slowly tighten the labor market.- (Reuters)
