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WRAPUP 1-Solid US jobs growth seen in Feb, jobless rate up

Published 03/04/2011, 01:01 AM
Updated 03/04/2011, 01:04 AM
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* Payrolls seen up 185,000, private jobs up 190,000

* Jobless rate seen rising to 9.1 percent from 9 percent

* Average work week seen rising to 34.3 hours, earnings up

By Lucia Mutikani

WASHINGTON, March 4 (Reuters) - U.S. employment likely grew solidly in February after being dampened by harsh weather, which would bolster views the recovery has entered a self-supporting phase.

Nonfarm payrolls increased 185,000, according to a Reuters survey, after a measly 36,000 jobs in January.

February's anticipated gains would be the largest since May, when payrolls were boosted by government hiring for the 2010 decennial census. Still, they would not be so large as to steer the Federal Reserve away from its easy policy stance.

The Labor Department will release the closely watched employment report at 8:30 a.m. EST (1330 GMT).

"We have moved into the expansion phase of the economic cycle and the economy is self-sustaining," said Brian Levitt, an economist at OppenheimerFunds in New York.

U.S. payrolls in recent months have tended to fall far short of economists' expectations, even though several labor market indicators -- including weekly data on initial claims for jobless benefits and employment measures in surveys by the Institute of Supply Management -- have pointed to a quickening pace of job creation.

Analysts, however, are increasingly convinced a foundation is now firmly in place for solid job growth going forward.

"Businesses are actually beginning to realize that they need to hire more aggressively because we do think demand is going to continue strengthening through out the year," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

Despite the anticipated bounce in payrolls, the unemployment rate is seen ticking up to 9.1 percent from 9.0 percent in January as discouraged jobseekers return to the labor force, a sign of confidence in the economy.

The jobless rate has dropped 0.8 percentage point since November, the biggest two-month decline since 1958. It is derived from a survey of households, while the job creation figure comes from a survey of employers.

The poll, taken last week, may not fully capture the growing sense of optimism among economists. Encouraging reports this week have led some economists to revise their forecasts higher.

FED WATCHING JOBLESS RATE

The unemployment rate is being closely watched by the Fed and could well determine the timing of the U.S. central bank's first interest rate hike. The Fed, which meets on March 15, has held overnight lending rates near zero since December 2008.

Economists believe the Fed will want to see payroll gains in excess of 200,000 for at least six to nine months and a significant decline in unemployment before starting to withdraw its massive monetary support from the economy.

"If we start to add enough jobs, sufficient to lower the unemployment rate, I think the Fed will feel a little more comfortable in easing off the throttle," said Sweet.

"But right now, the economy is still fragile. There are a number of potholes that we can hit and the Fed is not going to want to act on exiting any time soon."

A surge in crude oil prices above $100 a barrel due to turmoil in the Middle East and North Africa represent a headwind for the economy.

But Fed Chairman Ben Bernanke this week said high oil prices were unlikely to steal much from growth or spark broader inflation, unless they were sustained. For details see [ID:nN01145792]

With the jobless rate far from the 5 percent to 6 percent level that most officials think can be sustained without igniting inflationary wage pressures, and with inflation still short of the Fed's target of close to 2 percent, analysts expect the U.S. central bank to complete its $600 billion government bond-buying program to help the economy.

"We don't see anything on the near-term horizon that would alter that view, we don't see them falling short," said Michael Gapen, an economist at Barclays Capital in New York.

As in previous months, the private sector is expected to account for all the anticipated job gains in February, with an addition of 190,000 positions. That would be up from 50,000 in January.

Employment in the private service sector pulled back in January and is expected to show solid growth in February.

Payrolls in the goods-producing industries should see a weather-related bounce, with construction recouping some of the 32,000 jobs lost in January. Strong gains are expected in manufacturing, a sector that is powering the recovery.

Government employment probably contracted for a fourth straight month, pulled down by state and local governments, which are under heavy budgetary pressures.

The average work week is also expected to edge up after severe weather shortened working hours. Average hourly earnings are expected to increase at a slower pace than in January.

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