The U.S. economy added 164,000 jobs in April, missing expectations, though the unemployment rate fell to a new 17-year low, the Labor Department said Friday. 

The gains fell short of economists' estimates of a 192,000 increase in non-farm payrolls, while marking a pickup from March's increase of 103,000, the Bureau of Labor Statistics report showed. The unemployment rate fell to 3.9%, below the 4.1% rate where it had stood for six straight months. Economists had predicted that the rate would fall to 4%.

Investors have scrutinized recent employment reports for clues on whether the Fed might need to accelerate the pace of interest-rate hikes to keep inflation in check as the economy expands amid tight labor markets. Fed officials have projected two more quarter-point increases this year, but a growing number of economists are predicting that three more hikes are likely.

While the jobs growth was below expectations, the labor market remains unusually strong, with an average 208,000 jobs added over the past three months. Low unemployment often leads to faster wage increases, a key driver of inflation, but Friday's report showed that average hourly earnings climbed 2.6% over the past year, a slowdown from March's pace of 2.7%.

The mixed report contained "nothing that would suggest that the Fed would change its direction at this point," said Doug Clark, chief portfolio strategist at Prime Advisors, a unit of Sun Life Investment Management with $17 billion under management. "It's still indicative of a strong job market. It's good to see slow, solid growth."

The Standard & Poor's 500 Index slipped 0.2% to 2,629.73 in early trading.

The April unemployment rate was the lowest since late 2000 but still above readings of 3.4% reached in the late 1960s and the record low of 2.5% from 1953. 

So far, though, wage growth has remained subdued, helping to keep overall price increases in check. 

"We see steady wage growth, not outsize wage growth that is sparking any major inflation pressures at this point," said Tony Bedikian, head of global markets for Providence, Rhode Island-based Citizens Bank. 

While high inflation is considered bad for the economy, Fed officials have been flummoxed in recent years by persistently low inflation, usually seen as a sign of a sluggish economy. 

Recent signs have emerged that inflation is starting to climb, as President Donald Trump's tax cuts deliver a fillip to economic growth. The Fed's preferred measure of price increases jumped in March to 2%, reaching the central bank's target faster than officials had projected.

Earlier this week, the Fed's monetary-policy committee voted to hold benchmark borrowing costs at their current level at least through June, signaling comfort with the notion that the inflation rate could climb even further without hurting the economy too drastically. In a statement, the panel described the inflation target as "symmetric," indicating that the central bank could continue to raise rates even if prices rise faster than 2%. 

Stronger wage pressures would have to emerge to convince traders that the Fed will have to raise rates three more times this year, for a total of four in 2018, Bedikian said. The central bank's target for overnight borrowing costs is currently set at a range between 1.5% and 1.75%.   

"We'll likely need to see stronger wage numbers to start putting that fourth tightening-hike on the table," Bedikian said. 

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