U.S. job growth remained strong in March, and wages rebounded — signs of economic resilience that could allow a cautious Federal Reserve to gradually raise interest rates this year.

Nonfarm payrolls increased by a better-than-expected 215,000 last month, the Labor Department said Friday, and data for January and February were revised slightly down to show 1,000 fewer jobs created than previously reported. Average hourly earnings increased 7 cents.

The nation’s unemployment rate ticked up slightly to 5 percent, up from an eight-year low of 4.9 percent in the prior month. The last time the nation’s unemployment rate was 5 percent was May 2015. The increase was due to Americans' continuing to return to the labor force, a sign of confidence in the jobs market.

“While at first glance, the slight increase in the unemployment rate to 5% might appear to be negative, it happened as more people were in the workforce,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “More people were looking for work, and a good number were finding jobs.”

The labor market has largely shrugged off slowing global economic growth, a robust U.S. dollar that has hurt manufacturing exports, and cheap oil that has hit energy sector profitability. Limited wage increases, however, have left the Fed wary about further rate hikes even as the labor market tightens.

Fed Chair Janet Yellen said Tuesday that slowing global growth and lower oil prices posed a downside risk to the domestic economic outlook, adding that she considered it appropriate for policymakers to "proceed cautiously in adjusting policy."

Fed officials last month downgraded their economic growth expectations and forecast only two more rate rises this year. The U.S. central bank raised its benchmark overnight interest rate in December for the first time in nearly a decade.


Wages increased last month, with average hourly earnings rising 0.3 percent. That lifted the year-on-year earnings gain to 2.3 percent, from 2.2 percent in February.

Economists say a growth rate of between 3 percent and 3.5 percent in wages is needed to lift inflation to the Fed's 2 percent target. Though the Fed's preferred inflation measure is currently at 1.7 percent, Yellen has expressed skepticism over the sustainability of gains, citing transitory factors.

There were improvements in other labor market measures. The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose a tenth of a percentage point to 63 percent, the highest level since March 2014.

Employment gains in March were broad-based. But manufacturing lost 29,000 jobs, the largest number since December 2009, despite signs of stabilization in the factory sector.

The Labor Department's closely watched jobs report follows recent data showing sluggish consumer spending, weak business investment on capital in the first two months of the year, as well as some deterioration in the international trade balance, which prompted economists to slash their first-quarter GDP growth estimates to as low as a 0.9 percent annualized pace, from as high as a 2 percent rate.

The economy grew at a 1.4 percent rate in the fourth quarter.

Though employment gains have slowed after averaging 282,000 jobs per month in the fourth quarter, there is little labor market strain from the global slowdown, which helped to ignite a massive stock market sell-off at the start of the year.

First-time applications for unemployment benefits are near the lowest levels seen in 1973. Economists attribute the pullback in job gains to the inability of companies to find qualified workers for vacant positions.

"Although first-quarter growth may not have been quite as strong as we initially believed, the resilience of the labor market suggests that the economy is not in any serious trouble," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Data from Reuters were used to report this story.