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Solid job gains eyed in February

Applicants fill out forms during a job fair at the Southeast LA-Crenshaw WorkSource Center in Los Angeles.
Applicants fill out forms during a job fair at the Southeast LA-Crenshaw WorkSource Center in Los Angeles.

By Lucia Mutikani

WASHINGTON (Reuters) - The economy likely recorded a third month of solid job gains in February, which could further reduce the chances of additional monetary stimulus from the Federal Reserve.

Employers probably added 210,000 jobs to their payrolls last month, according to a Reuters survey, after creating 243,000 new positions in January. The unemployment rate is expected to have held at a three-year low of 8.3 percent.

It would be the first time since early 2011 that nonfarm payrolls have increased by more than 200,000 for three straight months and could be a boost for President Barack Obama, who hopes to win a second-term in office in November.

The employment report would be the latest set of data to show the economy holding its own, even as the euro zone appears to be sliding into recession.

While the pace of growth remains too slow for the Fed's liking, more signs of strength in the jobs market could further lessen the need for a third bond buying program -- or quantitative easing -- to lower interest rates.

Fed Chairman Bernanke last week described the labor market as "far from normal" and said continued improvement would require stronger growth in "final demand and production." Still, he offered no hints on further monetary stimulus.

"Bernanke has not mentioned QE3, that tells me the thinking is now data driven. The more good economic data we get, the more less likely QE3 becomes," said Jerry Webman, chief economist at OppenheimerFunds in New York.

The economy grew at a 3.0 percent annual rate in the fourth quarter. It is expected to step down to a 1.8 percent to 2.5 percent pace in the current period with high gasoline prices weighing on consumers and businesses pausing after restocking their shelves.

The Labor Department will release the February employment report on Friday at 8:30 a.m. EST.

The recent firming in the jobs market could lure Americans who have given up the search for work back into the labor force, raising the risk that the unemployment rate could edge up.

BOOST FOR OBAMA

The jobless rate has dropped 0.8 percentage point since August, providing some relief to Obama, whose re-election prospects could hinge on the health of the economy.

At 63.7 percent, the labor force participation rate -- the percentage of working-age Americans either with a job or looking for one -- is near 29-year lows.

According to economists, if it held steady at current levels and job growth averaged just 150,000 per month, the unemployment rate would fall below 8 percent by November. If it rose to 64 percent, employment growth would have to average about 220,000 a month.

Employment as measured by the government's survey of households, from which the unemployment rate is derived, averaged 234,000 a month in the second half of 2011.

"The odds look very good that Obama will be having his victory speech against the backdrop of a sub-8-percent unemployment rate," said Eric Green, chief economist at TD Securities in New York. "The labor market dynamics are working in favor of Mr. Obama as he slides into the November election."

While some parts of the jobs market, such as construction, have benefited from unseasonably warm winter weather, economists say a genuine improvement is underway, even though they expect a slight pull back in March.

Private payrolls are expected to again account for all the job gains in February, with government employment falling for a sixth straight month.

Manufacturing, which in January recorded the largest gain in a year, is expected to dominate job creation in February thanks to stepped up auto production.

Chrysler Group said last month it was hiring 1,800 workers at its factory in Illinois. There was also hiring at General Motors, Nissan, Volkswagen and Toyota, which also added a shift. Honda reinstated a second shift that had been idled in 2009 and increased overtime in January and February to build inventories.

The auto-driven rise in manufacturing employment is likely to continue in the coming months.

Ford Motor Co plans to increase workers at its factory in Louisville, Kentucky, this quarter and add shifts at other plants over the course of the year.

With the anticipated job gains in manufacturing, average hourly earnings are expected to have increased 0.2 percent last month after a similar increase in January.

Outside manufacturing, construction payrolls are expected to show another month of sizeable gains after adding a total of 52,000 jobs in December and January.

"The labor market is getting better, but it's not going to be true across the board," said Stephen Bronars, senior economist at Welch Consulting in Washington. "The key areas of weakness include people with less education and those who have been out of work for while."

In January, about 43 percent of the 12.8 million unemployed Americans had been out of work for more than 6 months, a major cause of concern for the Fed.

In addition, 23.8 million people are either out of work or underemployed and the level of employment is still 5.6 million below its pre-recession level.

(Additional reporting by Ben Klayman in Detroit; editing by Andrea Evans)

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