FXStreet (Mumbai) - The Labor Department today reported a surge in non-farm payroll in December. Nonfarm payrolls increased by 292,000, beating estimates. In November payrolls had increased by 252,000. Unemployment rate in the US came in at 5 per cent in December, staying at a 7-1/2-year low for the third straight month. Employment for October and November was also revised sharply higher. The revision showed 50,000 more jobs were created in the previous two months than what was reported earlier. The average hourly earnings however dropped in December. But the gain in earnings increased 2.5 per cent in December year on year compared to 2.3 per cent in November. Wage growth can be expected to rise further by the middle of the year as the labor market gradually moves towards full employment. The labor force participation rate was at 62.6 per cent in December, which is a near four-decade low. Services sector employment was very impressive. Manufacturing sector added 8,000 jobs in December while number of jobs added increased 45,000 in the construction sector. Retail payrolls on the other hand showed a small increase (4,300). Mining however lost 8,000 jobs in December. As oil tumbled to an 11-year low this week, several energy and mining companies were forced to slash spending further. This resulted in loss of jobs in related sectors. Impact of the jobs report on Fed policies Signs of a strengthening labor market are a welcome relief especially after the dismal manufacturing PMI data released earlier this week. It goes on to prove that the grim outlook seen earlier this week is only restricted to sectors that are influenced by currency strength as well as weak global demand. The slowdown noted previously in the manufacturing sector can be attributed to rising inventory which restricted activity in this sector and drop in oil and other commodity prices which hurt energy companies. Given that the jobless rate indicator is a guiding factor for the Fed, it would be interesting to watch whether the strong jobs report results in another rate hike when the central bank meets at the end of this month. The Fed had raised rates at its December meeting for the first time in a decade ending its zero rate regime. As for future hikes, it had assured that the pace would be gradual and data dependent. The minutes of the December meeting highlights that the Fed will continue to monitor incoming data to assess realized and expected goals before it takes a rate hike decision. The markets therefore have some reason to expect the Fed to move. However, the recent upheaval in financial markets sparked by fears of China stock market crash and the low inflation rate in the US will likely prompt policy makers to not act immediately. For more information, read our latest forex news.