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Strong U.S. job growth expected for March

By Lucia Mutikani

WASHINGTON (Reuters) - The U.S. economy likely notched up a fourth month of solid job growth in March, which would lower the need for the Federal Reserve to offer additional monetary stimulus to spur faster economic growth.

Businesses outside the farm sector are expected to have added 203,000 jobs last month, according to a Reuters survey, after nonfarm payrolls rose 227,000 in February.

The unemployment rate is seen holding at a three-year low of 8.3 percent for a third straight month.

That would mark the longest stretch of nonfarm employment gains topping 200,000 since 1999. The Labor Department will release its closely watched employment report on Friday at 8:30 a.m. EST (1230 GMT).

The employment report will come on the heels of minutes of the U.S. central bank's March meeting which showed policymakers less inclined to launch a third round of bond purchases or quantitative easing to further stimulate the economy.

Hopes of more policy easing had been fanned by Fed Chairman Ben Bernanke's comments last week, expressing doubts recent gains in the labor market that pushed the jobless rate down by 0.8 percent point since August could be sustained as this was achieved against the backdrop of weak economic growth.

"We are going to have a good report in March, that could weaken a little bit as we move into the rest of the year," said Paul Edelstein, a senior U.S. economist at IHS Global Insight in Lexington Massachusetts.

A fourth successive month of hefty employment gains could bring a smile for President Barack Obama who faces a tough re-election in November.

Employment creation has accelerated in recent months, with the three-month average in February exceeding 200,000 jobs for the second consecutive month, the first time this has happened since April 2006.

ESCAPE VELOCITY REACHED

If the March report does print 200,000 or more jobs, analysts said it will show that the labor market has vaulted to a higher plain and economic growth is firming.

"It suggests that the jobs recovery has finally achieved 'escape velocity' and if the recent three-month average pace is sustained, employment will regain its pre-recession level early in 2014," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.

The jobs market has received some lift from an unusually mild winter, which is expected to unwind in the coming months. There are already signs of slowing momentum, with new applications for jobless benefits not declining by as much as early in the year.

The employment report will be scrutinized for signs that would validate Bernanke's theory that a large portion of the joblessness is due to insufficient demand rather than a mismatch of skills, as most private economists argue.

"An important amount of unemployment we are now facing is indeed structural. There is a bias. If Bernanke admits that the structural component of unemployment is important he loses reason to act with monetary policy," said Adolfo Laurenti, deputy chief economist, Mesirow Financial in Chicago.

"He does not want to do that, he wants to continue to support to the economy."

Economists say evidence of structural unemployment can be seen in the high 8.3 percent unemployment rate and the proportion of Americans who have been out of work for more than six months. The latter remains above 40 percent.

The jobless rate also could stay above 8 percent throughout this year, if Americans who had given up the search for work are encouraged by better numbers and resume their hunt.

Part of the decline in the unemployment rate has been due to a fall in the labor force participation rate - the percentage of working-age Americans either with a job or looking for one - to near 29-year lows.

The labor force participation rate rose in February by the most since April 2010.

The private sector is expected to account for all the job gains in March, adding 218,000 new positions. Government is expected to see a seventh straight month of employment losses, but the pace is slowing.

Manufacturing is expected to report another month of strong job gains, thanks to stepped-up auto production as carmakers try to meet pent-up demand for motor vehicles.

Construction payrolls, which had benefited from the warm winter weather, before dropping in February is a wild card. Elsewhere, gains are expected in healthcare and temporary help categories, in line with recent trends.

Average hourly earnings are seen rising 0.2 percent, but the workweek is seen steady at a 3-1/2 year high of 34.5 hours for a fourth straight month.

(Reporting By Lucia Mutikani; Editing by Andrew Hay)

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