As investors sift through conflicting signals on economic growth, the January jobs report is an encouraging sign that the U.S. economy is on solid footing.

Nonfarm payrolls rose 304K in January, handily beating consensus estimates for a 165K gain. Through January, payrolls posted their biggest two-month increase since July 2016, even though December’s payroll gains were revised down to 222K.

Average hourly earnings grew 3.2% year over year, around the fastest pace of the cycle. Wages are one of the most telling job-market indicators to us, and as shown in the LPL Chart of the Day, year-over-year average hourly earnings growth typically reaches 4% before it threatens economic output.

“Labor-market strength remains a bright spot in the U.S. economy,” said LPL Research Chief Investment Strategist John Lynch. “We expect a solid job market and moderate wage growth to boost consumer spending and buoy output growth.”

The unemployment rate did tick up to 4.0% in January, but the increase came with caveats from the government shutdown. There were about 175K “unemployed” workers who reported being “temporarily laid off,” which include furloughed federal workers and contractors. Without these workers, the unemployment rate would’ve been around 3.9%. The participation rate climbed to its highest point since 2013, indicating that more participants were enticed by solid labor market conditions to enter the workforce.

Recent data on the job market has been volatile, but the overall trend has pointed to a solid outlook for domestic growth. Jobless claims rose to 253K through last week, following a drop in claims to a 49-year low (that we covered on the January 28 blog). Still, claims’ 4-week average has hovered around the lowest point in the cycle, another sign that a recession is further off than many expect. Data earlier this week also showed employers’ costs remained contained through the fourth quarter, providing more evidence that wages haven’t put excessive pressure on profit margins.