US job growth strong; unemployment rate rises to 4.0 percent

* Nonfarm payrolls increase 213,000 in June

* Unemployment rate rises to 4.0 percent

* Average hourly earnings rise 0.2 percent

U.S. job growth increased more than expected in June as manufacturers stepped up hiring, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases.

Nonfarm payrolls increased by rose by 213,000 jobs last month, the Labor Department said on Friday. Data for April and May was revised to show 37,000 more jobs created than previously reported. The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.

The unemployment rate rose to 4.0 percent from an 18-year low of 3.8 percent in June as more people entered the labor force in the sign of confidence in the jobs market.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in May. It had declined for three straight months.

Average hourly earnings rose five cents, or 0.2 percent in June after increasing 0.3 percent in May. That kept the annual increase in average hourly earnings at 2.7 percent.

The moderate wage growth should allay fears of a strong build-up in inflation pressures. The Fed's preferred inflation measure hit the central bank's 2 percent target in May for the first time in six years.

Minutes of the Fed's June 12-13 policy meeting published on Thursday offered an upbeat assessment of the labor market. The U.S. central bank increased interest rates last month for the second time this year and has projected two more rate hikes by year end. 

RELATED: Check out the best U.S. cities to find a job that pays at least $100,000: 

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15 best US cities to find jobs that pay $100,000
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15 best US cities to find jobs that pay $100,000

15. Phoenix, Arizona

Jobs available: 4,061

14. Baltimore, Maryland

Jobs available: 4,381

13. Houston, Texas

Jobs available: 4,682

12. Minneapolis, Minnesota

Jobs available: 5,153

11. Denver, Colorado

Jobs available: 5,760

10. Philadelphia, Pennsylvania

Jobs available: 7,495

9. Atlanta, Georgia

Jobs available: 7,724

8. Dallas, Texas

Jobs available: 7,974

7. Seattle, Washington

Jobs available: 8,082

6. Chicago, Illinois

Jobs available: 10,790

5. Los Angeles, California

Jobs available: 12,003

4. Boston, Massachusetts

Jobs available: 12,399

3. Washington DC

Jobs available: 17,274

2. New York, New York

Jobs available: 22,648

1. San Francisco, California

Jobs available: 25,116

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With a record 6.7 million unfilled jobs in April, economists are optimistic that wage growth will accelerate later this year.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 195,000 jobs last month and the unemployment rate steady at 3.8 percent. The employment report added to data such as consumer spending and trade that have suggested a sharp acceleration in economic growth in the second quarter.

Gross domestic product estimates for the April-June period are above a 4 percent annualized rate, double the 2.0 percent pace logged in the first quarter. But the Trump administration's "America First" trade policy, which has left the United States on the brink of trade wars with other major economies poses a risk to the labor market and economy.

President Donald Trump has imposed tariffs on a range of imported goods, including steel and aluminum, to protect domestic industries from what he says is unfair competition from foreign manufacturers.

Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs. The U.S. and China slapped tit-for-tat duties on $34 billion worth of the other's imports on Friday.

Economists expect the manufacturing sector to bear the brunt of the tit-for-tat tariffs, through a slowdown in hiring and capital expenditure.

Job gains in June were almost broad. Construction payrolls increased by 13,000 after rising by 29,000 jobs in May. Manufacturers added another 36,000 jobs last month on top of the 19,000 created in May.

Government payrolls increased by 11,000 jobs in June. That followed an increase of 5,000 jobs in May. Retailers cut 21,600 jobs last month, after boosting payrolls by 25,100 in May. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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