US non-farm payrolls rise more than expected in February, says Labor Department

US employers added more jobs than expected in February but wages declined compared to a month earlier, the Labor Department revealed on Friday.

Total non-farm payrolls employment rose 242,000 last month, beating analysts' expectations for a 195,000 increase.

Employment gains were driven by jobs in health care, social assistance, retail trade, food and drinking services, and private educational services. Job losses continued in mining as the slump in commodity prices hurt the sector.

January's figures were revised to a increase of 172,000 from an earlier estimate of 151,000.

A tightening labour market need to be viewed alongside indications that the pace of economic growth may be slowing - Chris Williamson

The unemployment rate was unchanged at 4.9% in February, as expected by analysts.

While the non-farms came in better than anticipated, average hourly earnings fell unexpectedly in February by 0.1% on the month to $25.35. Economists had penciled in a 0.2% month-on-month rise in average hourly earnings in February following a 0.5% gain in January.

On the year, hourly earnings rose 2.2% in February compared to 2.5% year-on-year growth in January and analysts' forecasts for no change.

Furthermore, the length of the average work week fell from 34.6 hours in January to 34.4 and the index of aggregate weekly hours - which some consider akin to a monthly proxy for gross domestic product - by -0.4% month-on-month to 104.9.

The analysts weigh in

Chris Williamson, chief economist at Markit, said the pick-up in employment numbers raises the possibility that the Federal Reserve will hike interest rates at its 15-16 March policy meeting.

"However, current signs of rising inflationary pressures and a tightening labour market need to be viewed alongside indications that the pace of economic growth may be slowing, and possibly sharply, amid growing concerns about the outlook," he said.

Dennis de Jong, managing director at UFX.com, said Fed Chair Janet Yellen will feel "vindicated" that the non-farm payrolls data confirmed the US economy is robust and continues to add jobs at a strong pace. Although the Fed also needs to weigh the impact of weak inflation, lower oil prices, instability in global stock markets and a slowdown in emerging markets, he said.

"Sustained global uncertainty, coupled with the forthcoming US presidential elections, which feature candidates on opposite sides of the fiscal policy spectrum, may force Yellen and Co. to delay any further interest rate movements. Wait and see should be the order of the day."

Dallas Fed President Robert Kaplan on Thursday called on the central bank to be patient on raising interest rates due to tighter financial conditions on US economic growth.

Danske Bank said in a research note to investors that the mix of strong jobs growth, modest wage inflation and rising labour force participation is "perfect for risk markets" .

"Rising labour force participation and continued modest wage inflation are easing the imminent pressure on the Fed to hike interest rates, while strong job growth supports household spending.

"We continue to look for the next Fed funds rate hike in September but the latest run of positive US data and improved financial market sentiment increase the chance of a June rate hike."