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Employers probably hired more workers in February than in any month since May last year, recovering from extreme winter weather and raising hopes the economic recovery has gathered critical momentum.
Nonfarm payrolls increased 185,000, according to a Reuters survey, after a measly 36,000 jobs in January.
The survey was conducted before strong signals this week that the fragile U.S. labor market was recovering more quickly from the worst recession since the Great Depression.
The peak of monthly employment last May was when payrolls were being boosted by government hiring for a census. Still, February’s expected gains are unlikely to sway the Federal Reserve from its ultra-easy monetary policies.
The Labor Department will release the closely watched employment report at 8:30 a.m. ET.
“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 fallen far short of economists’ expectations, despite labor market indicators — including weekly data on initial claims for jobless benefits and employment measures in surveys by the Institute of Supply Management — pointing to a faster pace of job creation.
Analysts, however, are increasingly convinced that a foundation is now 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 expected bounce in payrolls, the unemployment rate is seen ticking up to 9.1 percent from 9.0 percent in January as once discouraged jobseekers return to the labor force to look for work, 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. The rate is derived from a survey of households, while the job creation figure comes from a separate survey of employers.
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 new headwind for the economy. But Fed Chairman Ben Bernanke this week said they were unlikely to steal much from growth or spark broader inflation, as long they are not sustained.
With the jobless rate far from the 5 percent to 6 percent level that most officials think can be maintained without igniting inflationary wage pressures, and with inflation still short of the Fed’s target of close to 2 percent, analysts expect the Fed to complete its $600 billion government bond-buying program through June 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 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, when much of the United States was hit by heavy snowfall, 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 expected to edge up after taking a hit from the winter weather. Average hourly earnings are expected to increase at a slower pace than in January.
Copyright © 2011 Reuters