Nonfarm payrolls are expected to have increased by 185,000 last
month, according to a Reuters survey of economists, with the jobless
rate seen holding at a five-year low of 6.7 percent. Economists also
expect December's paltry count of 74,000 net new jobs, viewed by
many as an anomaly, to be raised sharply.
"We are far from having a booming economy, but we are growing
increasingly confident that the economy is developing enough
internal momentum to reach take-off velocity," said Bill Hampel,
chief economist at the Credit Union National Association in
A report on Monday showing a surprise drop in factory activity to an
eight-month low in January spooked investors and fanned fears of a
rapid cooling off in growth after the economy's robust performance
in the second half of 2013.
But a reading on the dominant services sector on Wednesday showed a
fairly strong expansion in activity in January.
The monthly jobs report, always closely watched by financial markets
around the globe, will serve as a tie breaker. The Labor Department
will release the data at 8:30 a.m.
While economists anticipate the labor market fared much better last
month, relentless freezing temperatures present a wild card.
"If we get another low, disappointing number, it will change the
short-term economic outlook," said Keith Hall, a senior scholar at
Mercatus Center at George Mason University in Arlington, Virginia.
A brightening growth picture encouraged the Federal Reserve last
month to move forward with a scaling back of its bond-buying
stimulus. Officials at the U.S. central bank will be anxious to see
payrolls snapping back from their weather-depressed December level.
While the unemployment rate is forecast holding steady, there is a
risk it could decline even further in January because jobless
benefits for more than one million long-term unemployed Americans
expired at the end of December. If they have since given up the
search for work, they would not be considered as being in the labor
market and unemployed.
ANOTHER DROP IN THE JOBLESS RATE?
"If some long-term unemployed give up looking for work when their
benefits run out, we could see another drop in the labor force
participation rate," said Hall, a former commissioner of the Bureau
of Labor Statistics.
"Conversely, people who lost their benefits might be forced to take
a less desirable job, moving them from unemployed to underemployed."
The participation rate, or the proportion of working-age Americans
who have a job or are looking for one, fell 0.2 percentage point to
62.8 percent in December, returning to the more than 35-year low hit
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A further decline could depress the unemployment rate, which is
already flirting with the 6.5 percent level that Fed officials have
said would trigger discussions over when to raise benchmark interest
rates from near zero.
But policymakers have made it clear that rates will not rise any
time soon even if the unemployment threshold is breached.
"The Fed will start to stress other measures of labor market slack
in their guidance on when they are going to raise interest rates,"
said Ryan Sweet, a senior economist at Moody's Analytics in West
The unemployment rate tumbled 0.3 percentage point in December,
taking the drop in 2013 to 1.2 percentage points.
Friday's report will include revisions to data on payrolls, the
workweek and earnings going back to 2009.
The government said last year that the revisions to this data, which
is drawn from a survey of employers, would likely show that 345,000
more jobs than previously thought were created in the 12 months
through March 2013.
The report will also incorporate new population estimates. This
means the employment and labor force figures that are derived from
the government's survey of households will not be comparable to
The private sector is expected to account for all the hiring in
January. Government payrolls are seen holding steady.
Manufacturing employment likely rose for a sixth month, while hiring
in the retail sector probably slowed after strong increases in the
While most economists think construction payrolls bounced back after
being depressed by the weather in December, frigid temperatures last
month may have pushed them down again.
Average hourly earnings likely rose by 0.2 percent after edging up
0.1 percent in December. The length of the workweek is seen steady
at an average of 34.4 hours.
(Reporting by Lucia Mutikani; editing by James Dalgleish)
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