Jan. 5 (Bloomberg) -- Employers in the U.S. added more workers than forecast last month and wages jumped, suggesting economic growth is rebounding from a nine-month slowdown.

The 167,000 increase in payrolls followed a November gain of 154,000 that was bigger than previously estimated, the Labor Department said today in Washington. The jobless rate held at 4.5 percent. Workers' average hourly earnings rose 0.5 percent, the most in eight months.

The report may ease the concerns of some Federal Reserve officials, expressed this week in minutes of their last meeting, that the risks of weaker economic growth have increased. At the same time, higher wages have the potential to fuel inflation, making an interest-rate cut less likely. Bonds tumbled.

``Today's data will disappoint those looking for fresh signs of a downturn and set back expectations for an about-face on monetary policy,'' said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. ``The underlying recovery remains intact.''

Banks, restaurants, healthcare and insurance companies stepped up hiring last month. Altogether, service industries contributed 178,000 new jobs, the report showed. Retailers cut 9,200 jobs, and manufacturers also trimmed employment.

Builders reduced payrolls by 3,000 after eliminating 25,000 positions in the prior month. Warmer-than-normal weather in much of the country may have prompted homebuilders to continue projects and postpone layoffs, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

Beating Forecasts

Economists predicted payrolls would rise by 100,000 following a previously reported 132,000 November increase, according to the median estimate in a Bloomberg News survey. Forecasts were scaled back after a report on Jan. 3 from ADP Employer Services showed companies, by their estimates, shed 40,000 workers.

Joel Prakken, chairman of Macroeconomics Advisers LLC in St. Louis, which produces the report jointly with ADP, said in an interview that it's more important to look at the correlation with the government's figures over a longer period of time. The data are more closely aligned after the Labor Department's yearly revisions, Prakken said.

``I certainly wouldn't rule out the possibility that something like this is going on here,'' said Prakken. ``It's not going to surprise me that, when all is said and done, this number gets pulled down'' when the government issues revisions next year, he said.

Interest Rates

Treasuries weakened, sending the yield on the benchmark 10- year note up 5 basis points to 4.65 percent at 4:45 p.m. in New York. The dollar strengthened to $1.3007 per euro from $1.3084.

``The economy's in pretty good shape,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``There is no likelihood of a near-term change in monetary policy.''

Workers' average hourly earnings rose 8 cents, or 0.5 percent, the most since April, after rising 0.3 percent the previous month. Earnings were up 4.2 percent from December 2005, a gain last exceeded in November 2000.

``The increase in income is what is driving the economy right now,'' said Markus Schomer, global economic strategist at AIG Global Investment Group in New York. The report ``supports those in the Fed that are a little more hawkish and want to keep an eye on inflation.'' Schomer's forecast of a 164,000 gain in payrolls was the highest among economists surveyed.

Unemployment Revisions

Today's report includes annual revisions to the household survey used to calculate the unemployment rate. The revisions, which covered the period from 2002 to 2006, didn't change the unemployment rate for any month last year.

Average weekly hours worked by production workers held at 33.9 for a third month, as forecast in the Bloomberg survey.

Average weekly earnings rose to $577.66 last month from $574.94 in November.

Minutes of the Fed's Dec. 12 meeting issued this week said that reports ``suggested that the labor market remained tight.''

``Growth in consumer spending was expected to be supported by favorable financial conditions and solid gains in income from employment, outweighing any damping effect of sluggish increases in housing wealth,'' the minutes also said.

Consumer spending, which accounts for about 70 percent of the economy, expanded at a 2.8 percent annual pace in the third quarter, compared with a 2.6 percent gain the previous three months. Economists surveyed by Bloomberg last month also projected a 2.8 percent increase for all of 2007.

Inflation Risks

While all Fed officials agreed that inflation was ``the predominant concern'' last month, some said risks to economic growth had increased.

Because fewer people are entering the labor force than in years past, smaller payroll gains are needed to keep the unemployment rate steady. Fed Bank of Chicago President Michael Moskow has said the figure is probably closer to 100,000 than the 150,000 economists used to estimate.

The economy grew at an annual rate of 2 percent in the third quarter, the slowest pace of 2006. Last month's Bloomberg survey showed economists expected the same growth rate for last quarter.

`Continues to Progress'

``The economy continues to progress, but not at a pace we've experienced in recent years,'' Carl Camden, president and chief operating officer of Troy, Michigan-based Kelly Services Inc., said in a statement. Kelly is the second-largest U.S. provider of temporary workers.

Goodyear Tire & Rubber Co., the largest U.S. tiremaker, said this week it will offer employees a buyout to trim as many as 400 U.S. jobs and reduce labor costs.

Among blacks, the unemployment rate fell to 8.4 percent from 8.6 percent in November, today's report showed. The jobless rate for Hispanics fell to 4.9 percent from 5 percent and for whites rose to 4.0 percent from 3.9 percent.

For teenagers, unemployment rose to 15.2 percent last month from 15.1 percent. The jobless rate for women fell to 3.9 percent from 4 percent. The rate for men increased to 4 percent from 3.9 percent.

To contact the reporter on this story: Joe Richter in Washington Jrichter1@bloomberg.netCarlos Torres in Washington ctorres2@bloomberg.net

Last Updated: January 5, 2007 16:49 EST