(Corrects first paragraph to show unemployment rate near 10-year low, not 17-year low)
* Nonfarm payrolls increase by 211,000 in April
* Unemployment rate falls to 4.4 percent
* Average hourly earnings increase 7 cents
By Lucia Mutikani
WASHINGTON, May 5 (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.
Nonfarm payrolls jumped by 211,000 jobs last month, the Labor Department said on Friday, well above the monthly average of 185,000 for this year and a jump from the gain of 79,000 in March.
Job gains were driven by a surge in hiring in the leisure and hospitality sector as well as business and professional services.
The drop of one-tenth of a percentage point in the unemployment rate took it to its lowest level since May 2007. The decline reflected both an increase in hiring and people leaving the labor force.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.9 percent from an 11-month high of 63 percent.
The rebound in hiring supports the Federal Reserve's contention that the pedestrian 0.7 percent annualized economic growth pace in the first quarter was likely "transitory," and its optimism that economic activity would expand at a "moderate" pace.
The Fed on Wednesday kept its benchmark overnight interest rate unchanged and said it expected labor market conditions would "strengthen somewhat further."
The U.S. central bank raised its overnight interest rate by a quarter of a percentage point in March and has forecast two more increases this year.
Average hourly earnings rose seven cents, or 0.3 percent, last month, partly because of a calendar quirk. While that lowered the year-on-year increase to 2.5 percent, the lowest since August 2016, there are signs that wage growth is accelerating as labor market slack diminishes.
A government report last week showed private sector wages recorded their biggest gain in 10 years in the first quarter.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. Job growth averaged 178,000 per month in the first quarter.
With the labor market expected to hit a level consistent with full employment this year, payroll gains could slow amid growing anecdotal evidence that firms are struggling to find qualified workers.
Construction payrolls rose 5,000 last month and manufacturing employment advanced by 6,000 jobs. Leisure and hospitality payrolls jumped by 55,000 in April. Professional and business services payrolls rose by 39,000.
Retail payrolls gained 6,300 after two straight months of declines. Retailers including J.C. Penney Co Inc, Macy's Inc and Abercrombie & Fitch have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.
Government payrolls jumped 17,000 last month.
Other labor market measures also showed strength last month.
A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 8.6 percent from 8.9 percent in March.
The employment-to-population ratio rose one-tenth of percentage point to a fresh eight-year high of 60.2 percent. (Reporting by Lucia Mutikani; Editing by Paul Simao)