Pat Wellenbach/AP A pedestrian passes a 'HELP WANTED' sign displayed in Portland, Maine.

With wages also posting a strong increase, analysts believe the Fed is likely to raise interest rates when it meets on February 1 and 2. Some solace, however, could be gleaned from the steady unemployment rate.

The Labor Department said U.S. non-farm payrolls added 315,000 jobs in December, up from 222,000 jobs in November.

December's payrolls data was stronger than the 224,000 forecast by economists in a Reuters poll, and the fastest since July when 373,000 jobs were added.

The average hourly wages of non-supervisory U.S. workers rose 0.4 percent to $13.46 -- more than the 0.3 percent gain forecast by economists.

``It is unambiguously a strong number,'' Wayne Ayers, FleetBoston Corp's chief economist, said on Reuters Television.

``The only good news is we didn't get a three (percent) handle on the unemployment rate ... it just reconfirms that the Fed will move in February, but probably not by 50 basis points,'' he added.

Report Shows Labor Market Still Tight

The report appeared to indicate that demand for labor remained strong in December, and that employers were being forced to pay higher wages in order to attract workers in a tight labor market.

With no major disruption from the so-called Year 2000 computer bug, and the U.S. economy still growing strongly, most analysts say an interest-rate hike may be inevitable.

The Fed has indicated that it is watching the job market especially closely as it considers whether to raise interest rates to cool the robust economy, which is within weeks of marking its longest expansion ever.

But the sting has been taken out of the report, the last before the Fed meets to consider monetary policy on Feb. 1-2, because financial markets have already priced in at least two further interest rate increases in the months ahead.

If the rate of employment had dipped to 4 percent, or below, many economists believe inflation would become inevitable — prompting aggressive action from the Fed. To be sure, Fed Governor Laurence Meyer said in November that a jobless rate below 4.1 percent would justify a response by the Fed.

Fed Likely to Raise Rates in February and March

Still, most economists firmly expect the Fed to raise short-term interest rates by one quarter of a percentage point in February and again on March 21, even if the jobless rate remains steady.

The Fed raised interest rates for the third time last year in November. At that time it said its actions so far should "markedly" reduce the inflation threat.

``Nothing in these numbers would change the outlook for Fed policy, which is to tighten credit and to try to encourage market conditions that would slow growth to a more sustainable pace this year,'' said David Jones, chief economist at Aubrey G. Lanston & Co. in New York.

``The report leaves the Fed on track for a quarter point hike in February ... (but) there isn't the kind of urgency to warrant a 50 basis point hike in February,'' he added.

There have been few signs of moderation in the economy. U.S. consumer confidence remains at the highest level in more than a generation and the interest rate increases have yet to have any noticeable effect on their spending patterns.

The U.S. economy expanded by 5.7 percent in the third quarter of the year, up sharply from the 4.8 percent growth rate in the second quarter, with few economists expecting a dramatic slowdown any time soon.

If the expansion continues until February, the U.S. economy will have grown for 107 consecutive months — an all-time record beating the 106 month benchmark set in the 1960s.

— Reuters contributed to this report