(Updates markets, adds details from jobs report, analyst comment)
By Ann Saphir
April 1 (Reuters) - Traders of short-term interest-rate futures boosted bets on an earlier Federal Reserve rate hike this year after a government report Friday showed wages rose in March and more Americans returned to the labor force.
The Fed, which broke from years of pinning rates to near-zero with a small interest-rate increase in December, is now seen lifting rates again in September, based on the price of futures contracts tied to the Fed's benchmark policy rate.
Before the report, which showed the unemployment rate ticking up as more Americans, encouraged by the availability of jobs, returned to the labor force, traders had expected the Fed to wait until December before increasing the rate.
As for a rate hike this month, when Fed policymakers next meet, traders still see the odds overwhelmingly against a move. But they now see about a one-in-three chance of a June rate hike, and a better-than-even chance of a rate hike by September.
"I think the strength of payrolls suggest the Fed will undoubtedly raise rates this year, likely in June," David Carter, chief investment officer at Lenox Wealth Advisors in New York.
Still, traders are pricing in only one rate hike this year, and many investors expect only two, a slow pace of monetary policy tightening by historical standards.
Fed Chair Janet Yellen has said the central bank will proceed cautiously with rate hikes this year, a sentiment repeated Thursday by the influential chief of the New York Fed.
(Reporting by Ann Saphir, additional reporting by Richard Leong; Editing by Chizu Nomiyama)