WASHINGTON: U.S. hiring likely picked up enough in February to keep the Federal Reserve on track in reducing its monetary stimulus.
But the size of the gain is nevertheless expected to be modest as the economy struggles to break free of the grip of unusually severe winter weather.
Nonfarm payrolls probably increased by 149,000 last month, with the jobless rate holding at a five-year low of 6.6 percent, according to a Reuters survey of economists.
"Without adverse weather we could have ended with something above 200,000," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
Nonfarm payrolls averaged about 205,000 new jobs per month in the first 11 months of 2013, but that figure dropped to just 94,000 for December and January as the unseasonably cold and snowy winter disrupted economic activity.
With snow and ice covering densely populated areas during the week employers were surveyed for February payrolls, another soft reading is expected.
Fed officials, including Chair Janet Yellen, have viewed the weakness in payrolls, which has been replicated in data such as retail sales, industrial production and home building, as largely weather-related and temporary.
On Thursday, New York Fed President William Dudley reiterated that the economic outlook would have to change significantly for the U.S. central bank to wind down its monthly bond purchases in a series of measured steps this year.
Most economists expect the Fed will announce further cuts in its stimulus at its next meeting on March 18-19.
"Once we get more seasonal weather and (if) the economic numbers do not improve, then the Fed might well take some action," said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio.
The Labor Department will release the monthly jobs report, which is closely watched by financial markets around the globe, on Friday at 8:30 a.m. EST.
OTHER FACTORS AT PLAY
But the weather is not the only factor behind the lull in activity.
Businesses are working through a huge pile of unsold goods accumulated in the second half of 2013, which means they have no incentive to place new orders with manufacturers.
In addition, the expiration of long-term unemployment benefits for more than one million Americans in December and cuts to food stamps are also hurting spending.
Keith Hall, a former commissioner of the U.S. Bureau of Labor Statistics, said he thinks factors other than weather have weighed on hiring.
"Weather effects would have shown up in hours worked rather than the level of payroll employment. Average weekly hours have been little changed," said Hall, a senior scholar at Mercatus Center at George Mason University in Arlington, Virginia.
While the unemployment rate is forecast as steady, it could decline as some of the former recipients of extended jobless benefits may no longer be looking for work. If this is the case, they would not be considered unemployed and in the labor market.
The private sector is expected to account for all the job gains in February, with government payrolls expected to have declined for a second straight month.
A seventh straight month of gains in manufacturing employment is expected, but the pace of hiring probably slowed from the 21,000 jobs added in January.
Construction payrolls, which surprised in January by logging their biggest one-month gain in nearly eight years, are expected to have declined last month because of bad weather.
A rebound is expected in education and health services employment after two straight months of declines. This sector has posted strong jobs gains since the economic recovery started nearly five years ago.
Average hourly earnings probably rose 0.2 percent after rising by the same margin in January. The length of the workweek likely held steady at an average of 34.4 hours, but severe weather could have reduced hours for some workers.
The workweek has been hovering around 34.4 hours and 34.5 hours since 2012.