PREVIEW-U.S. nonfarm payrolls seen +140,000 in December

WHAT: U.S. employment report for December

WHEN: Friday, Jan. 7 at 8:30 a.m. EST (1330 GMT)

REUTERS FORECASTS:

NONFARM PAYROLLS PRIVATE PAYROLLS

Median +140,000 +145,000

Minimum +90,000 +85,000

Maximum +225,000 +205,000

Prior +39,000 50,000

——-

UNEMPLOYMENT RATE AVG WORK WEEK AVG HRLY EARNINGS

Median 9.7 percent 34.3 hours +0.2 pct

Minimum 9.6 percent 34.0 hours 0.0

Maximum 10.0 percent 34.5 hours +0.2 pct

Prior 9.8 percent 34.3 hours 0.0

——-

FACTORS TO WATCH

U.S. employers likely stepped up hiring in December after
adding a meager 39,000 jobs in November. That would mark the
third straight month of gains and probably hold back the
unemployment rate from rising further after November’s surprise
spike to 9.8 percent.

An increase in nonfarm payrolls close to or above the
140,000 anticipated by economists would harden perceptions that
the economy was now on a sustainable growth path.

Recent data ranging from retail sales to manufacturing
strongly suggest the economy gained momentum as 2010 wound
down. But these signs of strength will not mean much unless
they are accompanied by a pick up in employment.

December’s employment report will be weighed by Federal
Reserve officials when they meet on January 25-26 and could
influence investors’ bets on whether the U.S. central bank will
complete its much criticized $600 billion government bond
buying program.

The stream of upbeat data has some economists speculating
the Fed will reconsider the so-called quantitative easing
program, which aims to stimulate demand by driving already low
borrowing costs down further.

At its last meeting on December 14, the Fed still regarded
the recovery as weak, despite the improvement in economic data.
Minutes from the meeting released on Tuesday said some
policymakers indicated a “fairly high” threshold for curtailing
the program.

Better employment prospects for December were bolstered by
the fact weekly claims for state unemployment benefits declined
for much of the month, touching their lowest level since July
2008 during the Christmas holiday week.

Employment gains in December are seen coming solely from
the private sector, which is expected to have added 145,000
jobs after a mere 50,000 in November. Private payrolls had
grown above 100,000 in each month of the year through October.

Private sector gains will likely be driven by the services
sector. Retail jobs are expected to rebound from a surprise
28,100 slump in November when retailers reported the best sales
in years.

Other gains are expected from the education and health
services sector, which has consistently added jobs, as well as
from the professional and business services sector. Temporary
help services hiring should also shed new light on prospects
for the jobs market. Temporary hiring is seen as a harbinger of
permanent hiring and gains in this area have been holding
steady.

The goods-producing sector probably shed jobs again in
December after losing 15,000 in November. Manufacturing
payrolls likely fell for a fifth straight month. A gauge of
national factory employment fell to a nine-month low in
December.

Forecasts for construction jobs range from a modest decline
to no change in December after payrolls in the sector fell
5,000 in November. Spending on construction projects has risen
since September.

Government payrolls are expected to have declined,
extending November’s 11,000 fall, mostly reflecting shrinking
local government employment.

Other indicators such as the average work week, which is
seen steady at 34.3 hours, could shed more light on future
hiring. Average hourly earnings are expected to have gained 0.2
percent after being flat in November.

The Labor Department will also publish annual revisions to
its household survey data from which the unemployment rate is
derived, which could see estimates for the past five years
revised.

MARKET IMPACT

Signs of the strengthening economic recovery have buoyed
U.S. stocks (Read more about the stock market today. ) in recent days and put Treasuries on the defense.
Analysts believe a better employment report for December has
already been priced in, which could limit market reaction
should the report meet or slightly exceed expectations.

But should the jobs report miss expectations again, it
could offset the “January effect” — a boost to stocks that
comes when fund managers are no longer engaged in year-end
window dressing and instead focus on stocks they find
attractive.

A weak jobs report could combine with the overbought
condition of the Standard & Poor’s 500 index to trigger a
pullback as some market participants expect declines following
the best December since 1991 in the U.S. benchmark.
(Polling by Bangalore unit; Writing by Lucia Mutikani,
additional reporting by Rodrigo Campos in New York; Editing by
Andrew [email protected]: +1-202-898-8315;
Reuters Messaging: [email protected]))

PREVIEW-U.S. nonfarm payrolls seen +140,000 in December