Hiring likely picked up in January as construction jobs rose and the U.S. economy began to absorb the effects of fiscal tightening, Nomura senior economist Ellen Zentner said on Thursday.
Nomura expects the U.S. economy added 170,000 nonfarm jobs and the unemployment rate fell to 7.7 percent in January despite slow growth and dampened business and consumer sentiment late last year.
Economists polled by Reuters expect the economy added 160,000 jobs, marginally higher from December's 155,000 gain. The Labor Department is set to release the data at 8:30 a.m. EST (1330 GMT) on Friday.
"There is a large disconnect between the labor market and economic growth," Zentner said during an interview in the Reuters Global Markets Forum. "But when I just concentrate on forecasting out one data point for jobs, it doesn't suggest there's been a drop-off in the labor market."
There will likely be a rise in construction jobs as the housing market recovers and workers continue to build in regions affected by Superstorm Sandy late last year.
A downward trend in jobless claims also supports the estimate, according to a research note by Nomura released Wednesday.
"The negative impact from Sandy has been absorbed," Zentner said in the forum. "What we're now seeing are the positive effects in housing from Sandy rebuild."
She sees consumer confidence, which dropped to its lowest point in more than a year this month, raises the downside risk to the jobs number.
Households blindsided by smaller paychecks as a result of the payroll tax cut that expired January 1 contributed to the decline, Zentner said.
On the other hand, an unemployment rate lower than anticipated may spur a selloff in Treasuries as expectations build that the Federal Reserve will halt its large-scale asset purchases sooner rather than later.
The Fed has said it will keep interest rates low until unemployment reaches a threshold it is satisfied with, but the exact timing of their move is uncertain.
"Financial markets don't take vagueness very well and the Fed has really created a communications nightmare by saying they'd like a 'substantial' improvement in the labor market," she said.
(Reporting by Steven Norton, editing by Walden Siew, desking by G Crosse)