WASHINGTON (Reuters) - U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

The Labor Department’s closely watched monthly employment report on Friday also showed the unemployment rate was steady at a 49-year low of 3.7 percent as 711,000 people entered the labor force, in a sign of confidence in the jobs market.

Sustained labor market strength eased fears about the economy’s health following weak housing and business spending data. President Donald Trump cheered the robust jobs report, which came less than a week before the midterm elections that will decide who controls the U.S. Congress.

“These are incredible numbers,” Trump tweeted.

Nonfarm payrolls increased by 250,000 jobs last month as employment in the leisure and hospitality sector bounced back after being held down by Hurricane Florence, which drenched North and South Carolina in mid-September.

There were also big gains in construction, professional and business services payrolls, and manufacturing, where employment increased by the most in 10 months.

The economy created 118,000 jobs in September.

Economists polled by Reuters had forecast payrolls would increase by 190,000 jobs in October and the unemployment rate would be unchanged at 3.7 percent. The Labor Department said Hurricane Michael, which struck the Florida Panhandle in mid-October, “had no discernible effect on the national employment and unemployment estimates for October.”

Average hourly earnings rose five cents, or 0.2 percent, in October after advancing 0.3 percent in September. That boosted the annual increase in wages to 3.1 percent, the biggest gain since April 2009, from 2.8 percent in September.

People wait in line at a stand during the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan

Employers also increased hours for workers last month. The average workweek rose to 34.5 hours from 34.4 hours in September.

“The report shows a booming U.S. economy with a sufficient whiff of wage inflation to keep the Fed on track to raise rates in December and at least twice next year,” said David Kelly, chief global strategist at JPMorgan Funds in New York.

The dollar .DXY was trading higher against a basket of currencies. Stocks on Wall Street fell while U.S. Treasury yields rose.

Strong annual wage growth mirrors other data published this week showing wages and salaries rising in the third quarter by the most since mid-2008. Hourly compensation also increased at a brisk pace in the third quarter.

Firming wages support the view that inflation will hover around the Fed’s 2.0 percent target for a while. The personal consumption expenditures price index excluding the volatile food and energy components, which is the Fed’s preferred inflation measure, has increased by 2.0 percent for five straight months.

GRAPHIC: U.S. wage growth - tmsnrt.rs/2CVLTHg

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The Fed is not expected to raise rates at its policy meeting next week, but economists believe October’s strong labor market data could see the U.S. central bank signal an increase in December. The Fed raised borrowing costs in September for the third time this year.

Some economists said Fed officials were likely to view the low unemployment and rising wages as modestly inflationary.

“The risk in 2019 is that the Fed will increase the pace of rate hikes,” said Joe Brusuelas, chief economist at RSM in New York. “Market participants will likely need to adjust their expectations going forward.”

Employers, scrambling to find qualified workers, are boosting wages. There are a record 7.14 million open jobs.

Online retail giant Amazon.com Inc AMZN.O announced last month it would raise its minimum wage to $15 per hour for U.S. employees starting in November. Workers at United States Steel Corp X.N are set to receive a hefty pay rise also.

Employment gains averaged 218,000 jobs per month over the past three months, double the roughly 100,000 needed to keep up with growth in the working-age population.

That is seen supporting the economy through at least early 2019 when gross domestic product is expected to significantly slow as the stimulus from the Trump administration’s $1.5 trillion tax cut package fades.

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 September.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell one-tenth of a percentage point to 7.4 percent, matching a 17-year low hit in August.

The employment-to-population ratio rose to 60.6 percent, the highest since January 2009, from 60.4 in September.

Last month, employment in the leisure and hospitality sector increased by 42,000 jobs after being unchanged in September. Retail payrolls rose by only 2,400 amid declines in employment at gasoline stations and sporting goods and music stores.

Construction companies hired 30,000 more workers in October. Jobs in the sector have been increasing despite weakness in the housing market. Government payrolls rose by 4,000 jobs.

Manufacturing employment increased by 32,000 jobs in October after adding 18,000 positions in September. So far, hiring in the manufacturing sector does not appear to have been affected by the White House’s protectionist trade policy, which has contributed to capacity constraints at factories.

The United States is locked in a bitter trade war with China that has led to tit-for-tat tariffs. Washington also has imposed tariffs on products from other trading partners, including the European Union, Canada and Mexico, prompting retaliation.

Despite the protectionist measures, the trade deficit continues to deteriorate. In a separate report on Friday, the Commerce Department said the trade gap increased 1.3 percent to $54.0 billion in September, widening for a fourth straight month.

“Tariffs have done little to dent America’s appetite for imports,” said Emily Mandel, an economist at Moody’s Analytics in West Chester, Pennsylvania. “The trade deficit will remain a drag on the economy.”