The U.S. economy added jobs at a faster-than-expected pace in June, but the unemployment rate rose as more people were enticed into the workforce, the Labor Department said Friday.
Non-farm payrolls climbed by 213,000 last month, the report from the department's Bureau of Labor Statistics showed. Economists surveyed by FactSet had projected an increase of 195,000.
The unemployment rate, which hit an 18-year-low of 3.8% in May, jumped unexpectedly to 4%. Data within the report show that about 600,000 people entered the civilian labor market, boosting the percentage of the population participating in the workforce to 62.9% from 62.7%.
The report should do little to change the trajectory of the Federal Reserve's interest-rate increases, since it reinforces officials' contention that the economy is growing at a "balanced" pace -- adding jobs but not too quickly to cause a spike in inflation. Wages, typically a precursor of rising prices, climbed 2.7% from a year earlier, below economists' estimates for a 2.8% increase, the report showed.
"The labor market is still strong, and wages are improving but not runaway," said Peng Zhou, managing director of derivatives and quantitative strategy at Sun Life Investment Management, which oversees about $45 billion. "Inflation is not an imminent fear."
Some investors have speculated that President Donald Trump's December tax cuts could lead to an overheated economy since unemployment is already so low, increasing competition for workers among expanding businesses.
The Standard & Poor's 500 Index of large U.S. stocks was up about 1% in Friday trading to 2,744.88. Yields on 10-year U.S. Treasury notes slid 0.02 percentage point to 2.82%
The Fed, led by Chairman Jerome Powell, has been raising interest rates since late 2015 to preempt a big jump in inflation as the U.S. economy heats up. At a meeting in June, officials raised interest rates to a range of 1.75% to 2% while signaling that two more quarter-point increases are likely before the end of this year. The rate had been held close to zero for about seven years as the Fed sought to revive the economy and markets following the financial crisis of 2008.
Minutes from the June meeting released Thursday showed that some officials were already speculating then that the unusually strong labor market was pulling in some people who previously had been too discouraged or unmotivated to look for jobs.
The minutes also revealed that, while jobs growth and consumer spending were buoyant following the president's tax cuts, business executives were growing increasingly nervous about the potential effect of his trade threats against China. In response, some executives were scaling back or postponing plans for new investments in things like plants and equipment.
Trump's 25% tariff on some $34 billion of Chinese imports took effect early Friday. China's foreign ministry told the Associated Press that retaliatory tariffs on U.S. imports took effect immediately afterward.