Nonfarm payrolls grew by 227,000 in January while the unemployment rate edged higher to 4.8 percent, the Bureau of Labor Statistics reported Friday.
Economists surveyed by Reuters expected payrolls to grow by 175,000, compared with 157,000 in December, and the unemployment rate to hold steady at 4.7 percent.
There was little wage pressure, however, with average hourly earnings up just 3 cents and 2.5 percent on an annualized basis. The average work week was unchanged at 34.4 hours. The declining wage growth came even though 19 states increased minimum wage laws this month.
Markets reaction to the news saw stock market futures move higher while government bond yields fell.
The report was the first since President Donald Trump took office on Jan. 20. In the past, Trump has been critical of the unemployment rate, saying it understates the actual level of joblessness.
"The number is pretty right on target with the really positive momentum that we've seen in many of the markets over the last three to four months, particularly since the election," said Tony Bedikian, head of global markets at Citizens Bank. "This keeps the trajectory of optimism on course."
However, expectations for a Fed interest rate hike plunged, with a March move now given just a 9 percent chance from about 18 percent Thursday, according to the CME.
"The lack of wage growth suggests further room for tightening in the labor market," Curt Long, chief economist for the National Association of Federally Insured Credit Unions, said in a statement. "So long as that remains true, and with inflation still below target, the Fed will be content to hold off on further interest rate hikes."