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Jobs seen boosting hopes of an economic revival

Jul 7, 2011, 9:09 p.m.

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. companies probably stepped up hiring in June as the economy recovers from a stumble in recent months, although job growth is not expected to be strong enough to eat into high unemployment.

Nonfarm payrolls are seen having risen by 90,000, according to a Reuters survey conducted last week. In May, employment rose a paltry 54,000.

Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they now expect gains of anywhere between 125,000 and 175,000.

The private sector will account for all the jobs created, as has been the trend over the last seven months, with layoffs at state and local governments continuing.

Nonetheless, the jobless rate, which is derived from a separate survey of households, is expected to hold steady at 9.1 percent.

The Labor Department will release its closely watched employment report at 8:30 a.m. The report provides one of the best early reads on the health of the U.S. economy and sets the tone for economic data for the rest of month.

"We have always described the difficult environment of the last couple of months as more of a soft patch than evidence of a double-dip," said Leo Abruzzese, global forecasting director at the Economist Intelligence Unit in New York.

"The figures on Friday will probably confirm that, while we are not back where we were at the beginning of the year, at least we are heading back in the right direction."

Nonfarm employment gains averaged 182,250 in the first four months of the year. Economists view the brake on hiring in May, with the smallest gain in eight months, as an aberration.

Economic activity in the first six months of the year was dampened by rising commodity prices and supply chain disruptions following Japan's devastating earthquake in March.

But those restraints have been easing. Gasoline prices have dropped 38 cents from their peak just above $4 a gallon in early May, and motor vehicle production is picking up as the supply of parts from Japan starts to normalize.

FINDING FIRMER GROUND

"The economy rather than downshifting is shifting up a little bit. We went through a soft spot and now we are getting to firmer ground," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.

Any sign the labor market is improving will bring relief to the Obama administration. It has struggled to get the economy to create enough jobs to absorb the 13.9 million unemployed Americans.

The economy is the top concern among voters and will feature prominently in President Barack Obama's bid for reelection next year. So far, the economy has regained only a fraction of the more than 8 million jobs lost during the recession.

At the same time, the Federal Reserve -- which wrapped up a $600 billion bond-buying program last week designed to spur lending and stimulate growth -- appears unlikely to take any further steps to boost the economy.

The economy needs to create between 125,000 and 150,000 new jobs a month just to absorb new labor force entrants.

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