5:49 AM
Payrolls seen hitting seven-month high
Addison Ray
By Lucia Mutikani
WASHINGTON | Fri Jan 7, 2011 8:27am EST
WASHINGTON (Reuters) - The U.S. economy probably created more jobs in December than any month since May, confirming a self-sustaining recovery is underway, but the unemployment rate is seen edging down only slightly.
Non-farm payrolls increased by an estimated 175,000 after November's slim 39,000 gain, according to a Reuters survey.
Job growth last May was boosted by temporary hiring for a decennial census. By contrast, the private sector is expected to have driven jobs growth in December -- up 180,000 for its biggest gain since April, according to the Reuters poll.
"The recovery is becoming more sustainable and less dependent on temporary growth factors, particularly inventories," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
"There is more support coming from private demand, particularly consumption. But the labor market improvement is still way slower than what everybody would hope for."
The Labor Department will release the closely watched employment report at 8:30 a.m. and it is expected to add to a run of stronger U.S. economic data.
Speculation about a strong jobs report helped push the U.S. dollar to a five-week high against the euro on Thursday.
"There's a strong consensus that there will be some good numbers coming out of the (United) States tomorrow ... and expectation of a huge payrolls number is fueling all sorts of dollar buying," said C.J. Gavsie, managing director of FX sales at BMO Capital Markets in Toronto.
Nonetheless, the unemployment rate is expected to have only ticked down to 9.7 percent from 9.8 percent in November.
Strong employment numbers for December would be a boost for President Barack Obama. High joblessness cost his Democratic Party control of the U.S. House of Representatives.
Federal Reserve officials will weigh the jobs report when they meet on January 25-26. Signs of strength could increase calls for the U.S. central bank to scale back its widely criticized $600 billion government bond-purchasing program.
Some policymakers indicated in December they had a "fairly high" threshold for curtailing the stimulus program.
FED TO STAY THE COURSE
Fed Chairman Ben Bernanke speaks on the economic outlook before the Senate Budget Committee at 9:30 a.m..
Analysts say the Fed's focus is on unemployment and expect it to complete the bond-buying plan.
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