(Reuters) - U.S. job growth rebounded sharply in April and the unemployment rate dropped to a near 10-year low of 4.4 percent, signs of a tightening labor market that could seal the case for an interest rate increase next month despite moderate wage growth.





KEY POINTS:

* Total payrolls up 211,000 vs 185,000 estimate & downwardly revised 79,000 prior (original 98,000)* Private payrolls up 194,000 vs 185,000 estimate & downwardly revised 77,000 prior (original 89,000)

* Unemployment rate down to 4.4 pct vs 4.6 pct estimate & 4.5 pct prior

* Average hourly earnings growth 0.3 pct vs 0.3 pct estimate & downwardly revised 0.1 pct prior (original 0.2 pct)

* U-6 rate pct 8.6 pct vs 8.9 pct prior* Labor force participation 62.9 pct vs 63.0 pct prior

* Household survey: Workforce grew by 12,000, employed rose by 156,000, unemployed fell by 146,000

COMMENTS:

SCOTT WREN, SENIOR GLOBAL EQUITY STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS:

"For me, as far as the non-farm number, it was good not great. Things are moving forward, the number I am really paying attention to mostly is the year-over-year change in average hourly earnings. Dipping down to 2.5 percent now, one month doesn't make a trend, and I still feel pretty good we are going to see a three percent print over the course of the next six months. It makes sense to me the underemployment rate, the U6, is coming down, that is a very important number. Finally the labor market is starting to tighten up.

"We are going to see some wage pressure and that is going to be a headwind for stocks, the wages and what that means for margins. There is not a lot of pricing power out there. This is just further confirmation the labor market continues to improve, we obviously have high consumer confidence and that is eventually going to bleed into some consumer spending."





PHIL ORLANDO, CHIEF EQUITY STRATEGIST, FEDERATED INVESTORS, NEW YORK:

"There's one word that the report sums up, and that word is redemption. A month ago, that 98,000 number was all weather and we needed to see a snap-back, to something around 200,000 this month, and that's exactly what we got. In my view the 98,000 we saw last month didn't do anything in terms of adjusting the Fed's thought process for the same reason the seven-tenth GDP print we saw the other day didn’t dissuade the Fed either.

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"I think we're going to see a June or July hike, and then another in the fall, call it September or October, and then the back end of the year, December, is going to be the Fed's attempt at balance sheet tightening. We're looking for three more moves, two on rates and one on the balance sheet.

"The economy's fine. One negative here is that we did have a further revision down in March, from 98,000 to 79,000. I don't know what the household survey was yet, I don't know if that number was good or bad. What it tells me is if the economy was doing OK. We'd love to see some of Trumponomics get passed later this year because we could use a boost in GDP growth above this 2 percent trend-line back to something closer to 3 percent or more."





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

"It is a very positive number. We continue to add jobs in the economy, the unemployment rate even ticked down a little bit. It's at its lowest level since 2007. We did see some modest wage acceleration, in line with the current trend. The labor market continues to perform well.

"The market will like this number because there was some concern that the economy was slowing a little bit. Obviously the last jobs report was a little disappointing, as was first quarter GDP. So this is indicative of an economy that continues to grow, albeit at a slower pace. The market will like that.

"As for the Fed, this keeps the Fed on track as did the meeting this week, where they indicated that they weren't giving much credence to some of the slower economic number in the first quarter, and this would confirm that view, in that employment remains strong."





MIKE BAZDARICH, SENIOR ECONOMIST, WESTERN ASSET MANAGEMENT CO., PASADENA, CALIFORNIA:

"The downward revision is pretty slight. We knew March was pretty soft already. We did see a bounce back in April. Overall it's still on a soggy side averaging both months. It does show a disconnect with the conventional narrative that we are at full employment and we will have faster growth.

"We are still seeing slower job growth compared with a year ago. It's not the growth narrative the Street is looking for earlier this year. That's why we might be seeing a drop in bond yields and a flatter yield curve. I think the Fed's bias is two more rate hikes this year. They want to see better data in April and we got that. There's more in these data to support that bias.

"Right now it's strong enough to support the impetus for a rate increase in June, but we have see how the other data come in. If they move June, they will probably move again in September. We are also going to see some contraction in the balance sheet later on this year."





AARON KOHLI, INTEREST RATE STRATEGIST, BMO CAPITAL MARKETS, NEW YORK:

"We saw a little bit of disappointment with the labor force participation falling, but the two-month change in payrolls was negligible. The beat on the headline is partly offset by the prior revision. It doesn't really do anything to change the view that the Fed is still on path to hike. A weak number today would have caused a problem for the Fed's transitional weakness. We still could see that next month, but this particular print didn't do anything to dispel that theory.

"It marginally makes the Fed hike more likely to hike in June, but the markets have been prepping for that. It keeps that hike on track and that's why the long-end (of the Treasuries curve) is rallying. The curve tends to flatten when the Fed gets more hawkish."





BRIAN BATTLE, DIRECTOR OF TRADING, PERFORMANCE TRUST CAPITAL PARTNERS, CHICAGO:

"So long as it's not an outlier it's no issue. It came within the range of expectations. The number took on less importance because the Fed Reserve told us they thought the first quarter softness in GDP was transitory."

"The good news for all of us is that it came in about what we were thinking. We've made this hurdle.

The downward revision for March "is only 19,000, it's not that big a deal. It's already in the rear view mirror."





MARKET REACTION:





STOCKS: S&P e-mini futures <ESc1> tick higher (vs unchanged at NFP release)

BONDS: 2- <US2YT=RR> and 10-year <US10YT=RR> Treasury yields tick lower

FOREX: The dollar index <.DXY> edges down, led by gains in euro <EUR=>; yen <JPY=> little changed





RATE FUTURES: Fed rate hike odds tick higher; Fed funds contract for June 2017 <FFM7> -1 basis point vs -0.5 bp at NFP release; September <FFU7> -1.5 basis point vs -0.5 bp at NFP release





(Americas Economics and Markets Desk; +1-646 223-6300)