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Rebound in job growth eyed, but momentum still slow

A man holds his briefcase while waiting in line during a job fair in Melville, New York July 19, 2012. REUTERS/Shannon Stapleton
A man holds his briefcase while waiting in line during a job fair in Melville, New York July 19, 2012. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) - Job growth likely accelerated in April, but probably still lacked enough muscle to help the economy head off the blow from deep government budget cuts and higher taxes.

Nonfarm payrolls are expected to have increased by 145,000, according to a Reuters survey of economists after stumbling to a nine-month low of 88,000 in March.

While March's meager job gains probably exaggerated the labor market's weakness, the expected increase for April would still fall short of the monthly average of 200,000 new jobs for the first two months of this year.

"It's consistent with the sluggish rate of growth that we have been seeing and expect to see going forward," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

The Labor Department will release the April employment report on Friday at 8:30 a.m. (1230 GMT).

The forecast job gains in April should be just enough to hold the unemployment rate at a four-year low of 7.6 percent, though the rate could even fall as older Americans retire and younger people give up the hunt for work in frustration.

The workforce participation rate -- the share of working-age Americans who either have a job or are looking for one -- hit a 34-year low in March.

"We expect the unemployment rate to continue its slow downward trek, reflecting our expectation that shifting demographics and discouraged workers will continue to overcome the number of workers returning to the labor market to seek employment," said Lewis Alexander, chief economist at Nomura Securities in New York.

"Federal Reserve officials are sure to take note of a slow economy that is unable to produce consistent strong job gains, and discount at least some of the decline in unemployment as being for the 'wrong' reasons."

Fed officials will wrap up a two-day policy meeting on Wednesday and are widely expected to keep purchasing $85 billion in bonds a month to press borrowing costs lower and spur a stronger recovery. Their next meeting is in mid-June.

SLUGGISH GROWTH

The U.S. economy grew at a moderate 2.5 percent annual rate in the first quarter, but data for March and April has suggested a loss of momentum.

Second-quarter growth forecasts range between a 1 percent to 2 percent rate -- a slowdown that analysts pin on belt-tightening in Washington. To slash the budget deficit, lawmakers let a 2 percent payroll tax cut expire at the end of last year and left in place $85 billion in across-the-board government spending cuts, which began to kick in at the beginning of March.

Some economists believe the budget cuts weighed on private job growth in April and may have led to government job cuts.

"Although the government did most of its cost cutting through furloughs, we suspect there were also some outright job cuts," said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

"The private sector will likely be impacted. At a minimum, it likely reduced hiring in those industries most closely exposed to the government, such as defense contracting."

Construction payrolls are expected to have posted gains for an 11th successive month, thanks to a recovering housing market.

Manufacturing employment may have snapped back after falling in March for the first time since September. Employment gauges in regional manufacturing surveys were mostly mixed in April.

Job gains in the private services sector are expected to have picked up from March's nine-month low. Employment could be supported by retail employment, which fell after eight straight months of gains.

Government payrolls are expected to have dropped by about 15,000 in April after falling by 7,000 in March. Government employment in March was weighed down by an 11,700 decline in jobs at the U.S. Postal Service.

"The drop in postal employment reported for March was probably a one-time event rather than the start of intensifying weakness," economists at JPMorgan wrote in a research note.

The employment report is expected to show average hourly earnings rose by 0.2 percent after being flat in March. The length of the average workweek is expected to have held steady at a nine-month high of 34.6 hours.

(Reporting By Lucia Mutikani; Editing by Leslie Adler)

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