WRAPUP 2-Jobs key to exit timing, top Fed officials say

* Fed officials emphasize jobs role in exit strategy

* Boston Fed chief sees current policy as appropriate

* St Louis Fed president says inflation uncertainty higher

* Richmond Fed's Lacker becoming more upbeat

By Kristina Cooke

HARTFORD, Conn., Jan 8 (Reuters) - The murky outlook for U.S. employment will be key to the timing of the Federal Reserve's exit from extraordinary efforts to support the economy, top central bank officials said on Friday.

The remarks, from a string of regional Fed bank presidents, came just as government data showed that the U.S. economy lost an additional 85,000 jobs in December, well beyond forecasts for a much smaller decline.

Eric Rosengren, head of the Boston Fed, told a business conference in Hartford, Connecticut, that he expects the labor market will improve only slowly, with the unemployment rate likely remaining "quite elevated" in the early phases of the recovery.

He said that with the economy still weak and the unemployment rate high, the Fed's accommodative policy stance is appropriate.

James Bullard, his St. Louis counterpart, told students at a university forum in Shanghai that the U.S. economy was improving, but policies to support the recovery should not be withdrawn yet.

"We'd like to see unemployment stabilize and other elements of the real economy move into positive territory so that you've got strong growth in 2010," Bullard said.

Richmond Fed President Jeffrey Lacker was a bit more optimistic, arguing that recent stabilization in the labor market could yet spark a renewed pick up in consumer confidence, with positive implications for spending.

The Fed cut its benchmark interest rate to near zero in December 2008 and put in place an array of liquidity and purchase programs to fight the worst recession in some 70 years. The U.S. central bank has vowed to keep rates low for an extended period.

Markets are closely watching for clues on the timing of the Fed's exit from its extraordinary economic and financial support. Most analysts don't expect the Fed's policy-setting panel to raise interest rates before the second half of 2010.

The Fed's policy-setting Federal Open Market Committee consists of the seven members of the Washington-based Board of Governors, the president of the Federal Reserve Bank of New York and four other regional Federal Reserve Bank presidents who serve one-year terms on a rotating basis.

Bullard and Rosengren's views are of particular interest to markets this year as the two regional Fed presidents have rotated into committee voting slots. Lacker was a voter in 2009 but will not be one in 2010.

Rosengren, seen as one of the more growth-focused "doves" among top Fed officials, was fairly pessimistic on the recovery's prospects.

He pointed to the high unemployment rate, as well as cautious consumers and businesses and continued banking strains, as significant economic headwinds. These hurdles mean the Fed should be in no rush to tighten policy, Rosengren said.

"With significant capacity in labor markets, wages and salaries and the ability of businesses to increase prices are all likely to be restrained, resulting in little immediate inflationary pressures," Rosengren said.

"In my view this should allow for accommodative monetary policy to continue to support the economy until the underlying demand of consumers and businesses becomes self-sustaining," he said.

Bullard, who is sometimes described as a hawkish centrist, agreed that price pressures remain subdued. However, he cautioned that uncertainty about inflation was mounting in the United States.

"Inflation remains low in the U.S., but inflation uncertainty is higher than before," he said.

Lacker expressed concern about the possibility of future inflation.

"During the recovery period ahead we may face an increasing risk of inflation edging upward, which has sometimes occurred during past recoveries," Lacker said. "While that risk appears to be minimal at this point, we will have to be careful as the recovery unfolds to keep inflation and inflation expectations from drifting around." (Editing by Chizu Nomiyama and Padraic Cassidy)