US hiring seen gaining traction in December

By Lucia Mutikani, Reuters

WASHINGTON– U.S. employment likely grew solidly last month, but the jobless rate probably rose from a 2-1/2 year low as improving conditions lured some Americans who had given up looking for work back into the labor market.

The government’s closely watched employment report due on Friday should cement views that economic growth accelerated in the fourth quarter after a tepid performance in the first nine months of 2011.

However, the pace of job creation remains too slow to signal a robust recovery is finally under way. Nonfarm payrolls rose 150,000 last month, according to a Reuters survey, after rising 120,000 in November.

Unusually mild weather during the month may have given employment a boost.

While the unemployment rate is expected to edge up to 8.7 percent from 8.6 percent, the tone of the report will likely be strengthened by upward revisions to the payrolls count for October and November, in keeping with a recent trend.

“Businesses are beginning to feel a little bit better about the future and are hiring, but we cannot get too excited because 150,000 is the minimum we need to keep the job market stable,”

said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.

The economy would need even faster job growth over a sustained period to make a noticeable dent in the pool of 24.4 million Americans who remain either out of work or underemployed 2-1/2 years after the end of the 2007-09 recession.

Job growth has averaged 131,000 over the past 11 months and even if payrolls rise as expected in December, employment will still be 6.1 million below its December 2007 level.

With the labor market still far from healthy, the debt crisis in Europe unresolved and tensions over Iran threatening to drive up oil prices, the U.S. economy faces stiff headwinds.

Economists predict the recovery will lose a step early this year after expanding in the fourth quarter at what is expected to be the fastest pace in 1-1/2 years.

This should keep alive the possibility of the Federal Reserve embarking on a third round of asset purchases, or quantitative easing, to spur stronger growth.

“We could see QE3 by the middle of the year,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

The employment report will offer little comfort to the Obama administration and could provide Republicans with more ammunition to attack the government’s handling of the economy.

President Barack Obama’s chances of a second term in office could depend on the health of the labor market.