A better-than-expected report on U.S. jobs could nudge the Federal Reserve toward raising interest rates again before the end of the year.
The Bureau of Labor Statistics reported that nonfarm payrolls increased by 336,000 last month, a sharp increase over the previous two months. The unemployment rate remains at 3.8 percent and wage growth is modest.
"It's going to make the Fed very wary and very concerned about the upside risk of inflation because that's one of the criteria they're going to use to judge the reacceleration of the economy," said Luke Tilley, chief economist at Wilmington Trust.
Fed officials, led by Chairman Jerome Powell, are considering whether they need to raise the benchmark interest rate again, after it has risen more than 5 percentage points over the past 19 months. The September meeting left rates unchanged, but 12 of the 19 members favored another rate hike this year, according to projections released at the meeting.
After the jobs report, the probability of a rate hike by the end of the year rose to 56% from an initial forecast of 48%.
Fed officials believe the labor market is still overheating, keeping inflation well above the central bank's 2 percent target.
Former US Treasury Secretary Lawrence Summers said the surge in US employment last month was "good news" for now, but it also showed the Federal Reserve's interest rate hike measures were not working as well as in the past, increasing the danger of an economic hard landing.
Mr. Summers made the comments on Bloomberg Television, but he said the risk of a hard landing could be "a little greater" if job growth accelerates.
A year and a half after the Federal Reserve embarked on its most aggressive monetary tightening in decades, raising interest rates by more than 5 percentage points, employment is still rising.
"We may be living in a world where interest rates may be less effective as a tool for guiding the economy than they have been in the past," Summers said. That means that to cool the economy, interest rates will be more volatile than in the past."