(Reuters) - U.S. job growth surged in January, with employers hiring the most workers in 11 months, pointing to underlying strength in the economy despite a darkening outlook that has left the Federal Reserve cautious about further interest rate hikes this year.

FILE PHOTO - Job seekers line up to apply during "Amazon Jobs Day," a job fair being held at the Amazon.com Fulfillment Center in Fall River, Massachusetts, U.S., August 2, 2017. REUTERS/Brian Snyder

The Labor Department’s closely watched monthly employment report on Friday showed no “discernible” impact on job growth from a 35-day partial government shutdown. But the longest shutdown in history, which ended a week ago, pushed up the unemployment rate to a seven-month high of 4.0 percent.

KEY POINTS:

** U.S. Jan nonfarm payrolls +304,000 (consensus +165,000) vs Dec +222,000 (prev +312,000), Nov +196,000 (prev +176,000)

** U.S. Jan labor force participation rate 63.2 pct vs Dec 63.1 pct (prev 63.1 pct)

** U.S. Jan jobless rate 4.0 pct (consensus 3.9 pct) vs Dec 3.9 pct (prev 3.9 pct)

** US Jan average hourly earnings all private workers +0.1 pct (cons +0.3 pct) vs Dec +0.4 pct (prev +0.4 pct) to $27.56 vs Dec $27.53

** Jan year-on-year earnings +3.2 pct (cons +3.2 pct) vs Dec +3.3 pct (prev +3.2 pct)

MARKET REACTION:

STOCKS: S&P e-mini futures reverse early weakness, now up 0.12 percent

BONDS: 2-year and 10-year Treasury yields rise from earlier level

FOREX: The dollar index turns slightly higher

RATE FUTURES: Fed funds contract for January 2020 turns slightly lower from slightly higher

COMMENTS:

RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS

“What we’re seeing here is what happened a month ago. What this largely speaks to is what the jobs market was prior to the government shutdown.

“The payroll number was significantly stronger than what was expected, so a lot more people are finding jobs basically.

“Overall, it speaks to what we’ve known for a long time, that the labor market is one of the strongest parts of the economy.

“This the biggest and most important part of the day, it has given the markets a boost when it was pretty much unchanged so this will give it a boost at the open.”

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT LLC, PHILADELPHIA

“In headline terms it is another excellent payrolls report with strong job growth, decent wage gains and even some upbeat revisions to the last couple months.

“The timing couldn’t be worse for the Federal Reserve seeing as they just issued a rather dovish missive on Wednesday. The question for financial markets over the next few trading sessions is whether the dovish outlook from the Fed was a reaction to data inputs or whether it represents a new reaction function to the same data.

“If the Fed’s message on Wednesday was a dovish reaction to the data, well even in the last few days, the data has improved.”

MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST, STATE STREET GLOBAL ADVISORS, BOSTON

“It’s great way to celebrate 100 consecutive months of jobs gains, which is a record. The report from top to bottom is very, very solid, top-line number beat. We did see average hourly numbers that continued to grow, but are not indicating any inflationary concerns that would cause the Fed to change its path on interest rates. Participation rate is the highest it’s been since 2013, and job gains were increasing pretty broad based across a lot of different categories, this jobs report is very, very solid.

“The futures are responding pretty positively, they were flattish to start the day but it looks like they were ticking up on the gains. Market participants are keeping an eye on the average hourly earnings to see if we’re going to get any inflationary pressures. In fact that number month over month softened, so the labor market remains strong while the inflationary pressures remain in check and that will be welcomed by investors today.”