Employment seen gaining speed

By @ibtimes on

Employment probably shifted into a higher gear in January to post a fourth straight month of gains, offering more evidence of a broadening economic recovery, though the jobless rate likely rose.

The government is expected to report on Friday that nonfarm payrolls grew 145,000, according to a Reuters survey, after adding 103,000 in December. But severe snow storms that slammed large parts of the nation could result in a much lower figure.

All of the anticipated job gains are expected to have been generated by the private sector and would add to other data suggesting that the manufacturing-driven recovery is now spreading to other sectors of the economy.

The Labor Department will release its closely watched employment report at 8:30 a.m. ET.

All the signals are pointing to a much improved labor market compared with last year and a strong payrolls report would be a nice confirmation that things are certainly headed in the right direction, said Omair Sharif, an economist at RBS in Stamford, Connecticut.

Still, the employment gains would be insufficient to prevent the jobless rate from edging up to 9.5 percent from 9.4 percent in November and too slim to discourage the Federal Reserve from completing its $600 billion government bond-buying program to support the economy.

The labor market has lagged the broader economy, which grew at a 3.2 percent annual rate in the fourth quarter. Fed Chairman Ben Bernanke on Thursday acknowledged the pick-up in the recovery, but said it will be several years before the unemployment rate has returned to a more normal level.

WEATHER COULD DAMPEN PAYROLLS

Economists believe the weather could have restrained payroll growth by 15,000 to 70,000 positions in January, although the way in which the government conducts its count could temper any storm-related impact.

For severe weather to reduce the payroll count, employees have to be off work for the entire reference pay period and not paid for the time missed. Workers who receive any pay, even if just for one hour, during the pay period that includes January 12 would be counted as employed.

My view is that the storms interrupted the hiring process. They have not diminished the demand for labor, but made it that much more difficult for both the job seekers and employers to consummate the hiring transaction, said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.

The jobless rate dropped sharply in December, but that partly reflected discouraged workers leaving the labor force. Economists viewed the decline as overstated and expect it rose a touch in January.

Further increases could be in store in the months ahead as the labor market gains strength, which could spur some discouraged workers to come back into the labor force.

We have a lot of workers on the sidelines. They will come back it when the labor market recovers, said Stephen Bronars, senior economist at Welch Consulting in Washington. The effect is that the unemployment rate is going to stay above a level we would consider acceptable for a longer period of time.

A persistently high unemployment rate could put in jeopardy President Barack Obama's chances of winning a second-term in office in the 2012 election.

The anticipated private employment gains of 155,000 were likely driven by the services sector, which accounts for more than 80 percent of jobs in the United States.

Payroll increases in goods-producing sectors were probably limited by the severe weather, whose impact was probably felt the most in construction. Manufacturing employment probably grew for a second straight month.

Government payrolls are expected to have dropped by about 10,000 in January, marking a third straight month of declines.

(Reporting by Lucia Mutikani; Editing by Dan Grebler)

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