Faster U.S. economic growth appears to finally be translating to higher wages, lending credence to Federal Reserve officials' predictions that inflation could climb toward more normal levels.

Average hourly earnings of all employees on private nonfarm payrolls climbed by 2.9% over the past year to $26.74 in January, accelerating from December's growth rate of 2.7%, the U.S. Labor Department said Friday. The country added 200,000 jobs last month, exceeding economists' average forecast for 180,000, as well as the revised job-gains figure of 160,000 in December, according to the report.

While the U.S. labor market has strengthened in recent years, helping to push the unemployment rate down to a 17-year low of 4.1%, wage gains have lagged, spurring concerns that the economic acceleration wasn't translating to gains for workers. Now, signs are emerging that employers are having to pay up for their workers, helping to push inflation toward Fed officials' goal of 2%.

The challenge for investors is to untangle the reverse logic of the stock market: Economic improvement can be bad for stocks, because central bankers then grow more concerned about inflation, prompting them to raise interest rates, and thus putting downward pressure on asset prices.

"We saw some fairly strong wage gains for the first time in quite a while," said Tony Bedikian, head of global markets for Citizens Bank, a part of Citizens Financial Group Inc. (CFG)  "Now that we're starting to see some wage gains, the Fed will be looking even more closely at that in their inflation measures. They could be raising rates more quickly than anticipated."

The Standard & Poor's 500 Index of large U.S. stocks slipped 1.2% in New York trading on Friday. 

Earlier this week, Federal Reserve officials kept interest rates steady at their first meeting of the year, saying that labor markets continue to strengthen amid "solid" economic activity.

The Fed raised rates three times in 2017, bringing the target to a range of 1.25% to 1.5%, from near zero before the central bank starting the current hiking cycle in late 2015.

According to economists at Bank of America Corp. (BAC) , the Fed's monetary-policy statement on Wednesday was "modestly hawkish," supporting expectations that the central bank will increase rates three times this year, including a quarter-point hike at its next meeting in March.

Mark Hamrick, the senior economic analyst at Bankrate.com, said that wage growth might soon surpass 3%, something he says hasn't happened in years. Such an increase would spur markets to consider whether the economy is overheating, he wrote Friday in an e-mail.

"The bigger question is how many rate increases are looming in 2018," Hamrick said.

Economists at the Dutch bank ING said Friday after the jobs report that they might have to revise their forecast for Fed rate hikes this year to four from three.

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