(Reuters) - U.S. employers hired the most workers in 10 months in December while boosting wages, which could help to allay a recent upsurge in fears about the economy’s health that has roiled financial markets.

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson/File Photo

KEY POINTS:

* Total payrolls rose 312,000 vs 177,000 estimate and upwardly revised 176,000 prior (original 155,000)* Private payrolls rose 301,000 vs 175,000 estimate and upwardly revised 173,000 prior (original 161,000)

* Unemployment rate rises to 3.9 pct from 3.7 pct and vs 3.7 pct estimate

* Average hourly earnings rise 0.4 pct month-to-month vs 0.3 pct estimate and unrevised 0.2 pct prior

* Average hourly earnings rise 3.2 pct year-over-year vs unrevised 3.1 pct prior and 3.0 pct estimate

* U-6 rate pct unchanged at 7.6 pct * Labor force participation rises to 63.1 pct from 62.9 pct

* Household survey: Workforce grew by 419,000; employed rose by 142,000; unemployed increased by 276,000

MARKET REACTION:

STOCKS: S&P e-mini futures ESc1, after an initial paring of gains, now back to pre-report levels, up about 1.4 pct

BONDS: 2- US2YT=RR and 10-year US10YT=RR Treasury yields rise from earlier level

FOREX: The dollar index .DXY rises, greenback gains against both euro EUR= and yen JPY=

RATE FUTURES: Fed funds contract for January 2020 FFF0 drop

COMMENTS:

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NORTH CAROLINA:

“The increase in payroll is definitely another sign that the economy continues to do well. In the short run, too strong of a report might spook the market right now when it’s looking for the Fed to stay on hold.”

“In Atlanta today, you have (Fed Chair) Jerome Powell on stage with his two predecessors, Ben Bernanke and Janet Yellen. People are looking for the Fed to stay on hold as they watch for a global growth slowdown. We’ll see how the trade negotiations with China go on Monday.”

“All things being equal, the job report is probably negative for stocks. What you see (in stock futures) is people not focused on the jobs number. They’re much more interested in what happens with the trade negotiations on Monday. The Fed is important, but the jobs number is secondary to what will happen on Monday. So stocks are going to reflect optimism on what may happen with trade negotiations rather than concern that the Fed will move too quickly.”

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

“It’s just a fascinating report, I think in many ways, because there were some mixed results. The market doesn’t really know how to take it.”

“The nonfarm payroll number was a blockbuster number if you look at what you were seeing recently. I was a little surprised when the ADP number came out midweek, how high it was, and this was even bigger.”

“It also was a bit of a surprise, given how high that number was, that we saw a two-tenths uptick in the unemployment rate, which takes us back to where we were in August.”

“Those two things are conflicting to some extent. But overall you would say it’s a pretty good report.”

PAUL ASHWORTH, CHIEF U.S. ECONOMIST, CAPITAL ECONOMICS, TORONTO:

“The far bigger-than-expected 312,000 jump in non-farm payrolls in December would seem to make a mockery of market fears of an impending recession.”

“Admittedly, employment is a coincident indicator, whereas the ISM manufacturing index, which we learned yesterday fell sharply in December, is a leading indicator. But, even allowing for that distinction, this employment report suggests the U.S. economy still has considerable forward momentum. Overall, the markets may have decided the Fed’s work is done, but the economic data say otherwise.”

MICHAEL JAMES, MANAGING DIRECTOR, EQUITY TRADING, WEDBUSH SECURITIES, LOS ANGELES:

“It’s going to be an interesting day to say the least. Given the weakness yesterday caused by Apple and a pretty underwhelming ISM report and that contributed to the concerns about global growth softening. And it would seem to be a more positive view of growth from the jobs report this morning.”

“You had disappointment from Fedex a couple of weeks ago, Apple, last night. ISM report indicated softness. That would be somewhat counteracted today by the stronger jobs report. We’ll see if the early strength in the market holds, given this will likely give more reason for the Fed raising not cutting rates as some had speculated during the day yesterday.”

“This only continues a cloudy picture in terms of global growth strengthening versus softening.”

“It’s very hard right now for investors to have a clear picture of where the United States and global economies stand in terms of growth, whether it is maintaining or softening. Today’s data point would indicate more of a stronger backdrop.”

“As you continue to get these cross currents, it’s only going to increase the uncertainty among investors and create excessive volatility.”

GEORGE GONCALVES, HEAD OF U.S. RATES STRATEGY, NOMURA, NEW YORK:

“This is a welcome development because it’s not a miss. This should help pause some of the negative sentiment out there. But this is only one number. We have (Jerome) Powell coming up that should be more important than one piece of data.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

“It was an incredibly good number, you have an incredibly good number and you have a pretty hawkish Fed official telling you that she’s inclined to pause. It doesn’t add up.”

“The Fed is literally taking its cues from the equity market and not from the economic backdrop. That’s not a dynamic that I think any of us should actually want. You have an economy that continues to chug along at a really solid pace. The all-important consumer sector, the lifeblood of the labor backdrop, is incredibly strong and so it’s really easy to build a case that economic activity continues to move along with a decent amount of momentum here.”

“I don’t think any of this matters, the market’s hyperfocused on negatives. It was a really good number. there’s nothing not to like. The unemployment rate rose, but the unemployment rate rose because participation was up, in other words there was a massive flow of people into the labor market. That’s usually a sign of health.”

GENNADIY GOLDBERG, INTEREST RATES STRATEGIST, TD SECURITIES, NEW YORK:

“I think there are certainly still a few questions in the market’s mind as to what’s moving risk sentiment.”

“I don’t think this very strong report is the end-all for market pricing. Markets are still watching trade negotiations, shut-down negotiations, to some extent the equity market itself.”

“It is certainly a piece of good news in a very turbulent time. You’ve got a pretty positive reaction to the number, we’ve retraced a good chunk of the rally in Treasuries that we saw yesterday. I don’t think the move to higher yields will be a straight line from here.”

TRACIE MCMILLION, HEAD OF GLOBAL ASSET ALLOCATION STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, WINSTON-SALEM, NORTH CAROLINA:

“It was a surprisingly high number and then revisions put the prior two months higher.”

“Overall it’s a positive for the U.S. economy that more people are working. The market is taking the news pretty well because this means the Fed almost certainly has cover to raise rates this year. One of the things the market has been so concerned about is further rate increases and tighter monetary policy. The market you would think would sell off if rate increases were the primary concern. This to me means the primary market concern is growth and more people working means the economy is healthy.”

“Overall this news is really good. We saw increases in healthcare, restaurants, construction numbers. The participation rate moving higher is also a positive.”

“Wages went up 0.4 percent and that was a little hot. People could be worried wages will continue to increase at this rate. That’s something that might lead the Fed to act more aggressively than the market thinks if wages continue to rise at this rate.”

“The markets are watching a number of different factors at the same time. Trade is another pillar.”

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON:

“I think it is a dollar-friendly number and will go some way in allying concerns about a slowing U.S. economy. The blockbuster jobs report will certainly validate the Fed’s hawkish stance.”

“I think once again we are looking at quite a chasm between what the market expects for interest rates this year and what the Fed is forecasting. Today’s jobs report will go some way in bolstering the Fed’s argument that more rate hikes are on the table.”

(This story has been refiled to correct typo in 4th paragraph of MCMILLION comments)