Nonfarm payrolls increase 353,000 in January
Unemployment rate unchanged at 3.7
Average hourly earnings rise 0.6; up 4.5 yearonyear

WASHINGTON, Feb 2 Reuters U.S. job growth accelerated in January and wages increased by the most in nearly two years, signs of persistent strength in the labor market that could make it difficult for the Federal Reserve to start cutting interest rates in May as currently envisaged by financial markets.

Nonfarm payrolls increased by 353,000 jobs last month. The closely watched employment report from the Labor Department39;s Bureau of Labor Statistics on Friday also showed the unemployment rate at 3.7 last month.

The economy added 126,000 more jobs in November and December than previously estimated. Financial markets lowered their expectations for a May rate cut on the data.

Resilient demand and strong worker productivity are likely encouraging businesses to hire and retain more employees, a trend that could shield the economy from a recession this year.

Given the Fed now wants strong job growth, as Fed Chair Jerome Powell told us just two days ago, this report should not discourage the Fed from cutting rates, said Chris Low, chief economist at FHN Financial in New York. By the same token, however, it is not going to encourage them to rush into rate cutting.

Economists polled by Reuters had forecast payrolls increasing 180,000 last month.

Estimates ranged from 120,000 to 290,000. Employment gains remain well above the roughly…