US job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8%, pointing to rapidly tightening labour market conditions, which could stir concerns about inflation. 

Today's closely watched employment report also showed wages rising solidly last month, cementing expectations that the Federal Reserve will raise interest rates in June. 

Non-farm payrolls increased by 223,000 jobs last month, the Labor Department said. 

Data for March and April was revised to show the economy creating 15,000 more jobs than previously reported. Economists blamed bad weather for the slowdown in job growth over those two months. 

Today's figures showed that average hourly earnings rose eight cents, or 0.3% last month after edging up 0.1% in April. 

That lifted the annual increase in average hourly earnings to 2.7% from 2.6% in April. 

The one-tenth of a percentage point drop in the unemployment rate pushed it to a level last seen in April 2000. The jobless rate is now at the Fed's forecast of 3.8% by the end of this year. 

The strong employment report added to a string of solid economic data, including consumer spending and industrial production, that have suggested economic growth accelerated early in the second quarter after slowing at the beginning of the year.

The strong economy against the backdrop of a $1.5 trillion income tax cut package and increased government spending could fan price pressures. Inflation is running just below the Fed's 2% target. 

Monthly job gains have averaged about 179,000 over the last three months, more than the roughly 120,000 needed to keep up with growth in the working-age population. 

Economists polled by Reuters had forecast non-farm payrolls increased by 188,000 jobs last month and the unemployment rate unchanged at 3.9%.