* Nonfarm payrolls forecast rising 196,000 in December
* Unemployment rate seen steady at 7 percent
* Average earnings seen rising, workweek steady
* Report expected to show economy gaining steam
By Lucia Mutikani
WASHINGTON, Jan 10 U.S. employment likely
increased solidly in December in the latest sign of
strengthening fundamentals that look set to put the economy on a
faster growth path this year.
Nonfarm payrolls probably rose by 196,000 jobs last month,
according to a Reuters survey of economists, slightly below
November's 203,000 gain, but a touch above the monthly average
for the three months through November.
The poll was conducted before reports on Wednesday, which
showed private sector employers hired staff at the fastest pace
in 13 months in December, while small businesses created the
most jobs in nearly eight years. That left some economists
anticipating an even stronger payrolls number than forecast.
"Evidence is mounting that the economy is kicking into
higher gear," said Ryan Sweet, a senior economist at Moody's
Analytics in West Chester, Pennsylvania. "It is transitioning
from one that was stuck in a rut for several years to one that's
poised to grow faster this year."
The Labor Department will release the closely watched
employment report at 8:30 a.m. (1330 GMT).
If the forecasts are right, the report will add to a string
of data - from consumer spending and trade to industrial
production - that has suggested the economy ended 2013 on strong
footing and is positioned to gain even more strength this year.
The change in the economy's fortunes, which gave the Federal
Reserve confidence last month to start dialing back its massive
monetary stimulus, reflects waning fiscal uncertainty after
lawmakers in Washington agreed on a two-year budget.
"Consumers were holding back because they were not sure what
to expect from the economy. Businesses were doing the same, not
hiring or spending money on equipment," said Sung Won Sohn, an
economics professor at California State University Channel
Islands in Camarillo, California.
"Consumers seem to have opened up their wallets. They are
spending more and as a result the economy should look better,
and that means more hiring."
JOBLESS RATE SEEN HOLDING AT FIVE-YEAR LOW
Despite the anticipated job gains, the unemployment rate is
expected to have held steady at a five-year low of 7 percent
after a surprisingly large 0.3 percentage point drop in
Annual revisions to the data from the Labor Department's
survey of households, which is used to calculate the jobless
rate, could mean a rewrite of history, but any changes are
expected to be small.
A solid reading on the health of the labor market could
encourage the Fed to move forward with plans to further reduce
its bond-buying stimulus. The U.S. central bank announced in
December that it would trim its monthly purchases to $75 billion
from $85 billion, and many economists expect it to decide on a
similar-sized cut at its next meeting on Jan. 28-29.
"There is a reasonable expectation they will take most of
the year to taper to zero," said Robert Dye, chief economist at
Comerica in Dallas.
Growth this year is expected to top 3 percent, a sharp
acceleration from the 1.7 percent forecast for 2013.
December's expected job gains are likely to be just as
broad-based as they were in November, with government payrolls
probably rising by about 1,000. That would mark a second
straight monthly increase, largely reflecting hiring by state
and local governments.
Cold weather during the survey period could have slowed job
gains in manufacturing, construction and leisure industries. But
economists said that would probably be offset by brisk retail
and transportation sector hiring during the holiday season.
"There will be a lot of temporary factors that will be
pulling and tugging at these numbers. What really matters is the
underlying health of the jobs market," said Moody's Analytics'
"If we get a surprisingly weak number, you just want to let
that roll off your back. Other employment indicators point to an
improvement in labor market conditions between November and
Manufacturing employment is expected to rise for a fifth
straight month. The number of construction jobs is seen
increasing for a seventh consecutive month.
Employment in the retail sector is expected to have
accelerated from November's seven-month low, which economists
had blamed on a late Thanksgiving. Payroll gains were also
expected in professional and business services.
Despite the job market's show of stamina, average hourly
earnings probably rose only 0.2 percent after rising by the same
margin in November. The length of the workweek likely held
steady at an average of 34.5 hours.