Solid U.S. job growth expected for March as winter fades

WASHINGTON (Reuters) - U.S. job growth likely accelerated in March as the winter's gloom started to lift, providing the strongest signal yet that economic growth was shifting into higher gear.

Nonfarm payrolls probably increased by 200,000, the largest gain in four months, according to a Reuters poll of economists. Hiring advanced by 175,000 jobs in February.

The unemployment rate is expected to have dropped one-tenth of a percentage point to 6.6 percent.

The anticipated gain in employment would take job growth back near the 204,000 monthly average that prevailed through the first 11 months of 2013.

"It proves that some of the economy's struggles in the first quarter were temporary," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "With the weather warming up it seems the job market is improving too."

The Labor Department will release its monthly jobs report, which is closely watched by financial markets around the globe, on Friday at 8:30 a.m. (1230 GMT).

An unusually cold and snowy winter began to slam the economy in December and has weighed heavily on first-quarter growth. Growth has also been crimped by an effort by businesses to work through a glut of unsold goods, the expiration of long-term unemployment benefits and cuts to food stamps.

A strong pace of job growth in March could heighten the debate on the timing of the Federal Reserve's first interest rate increase. The U.S. central bank is expected to wrap up a bond-buying stimulus program by the end of the year, but hold off on raising rates until mid-2015.

It cut benchmark overnight lending rates to a historic low of zero to 0.25 percent in December 2008 and pledged to keep them low while it nursed the economy back to health.

CLOSE TO RECOUPING JOBS LOSSES

If forecasts are correct, last month's gains would leave employment 465,000 jobs below its pre-recession peak, ground that likely could be made up in just a few more months.

But the ranks of the long-term unemployed remain stubbornly high and many Americans can find only part-time work, factors that Fed Chair Janet Yellen said on Monday argued for continued Fed support for the economy.

"There is still a lot of labor market slack," said Gus Faucher, senior economist at PNC Financial Services Group. "Even as the unemployment rate falls toward 6 percent, the Fed is likely to hold off on interest rate hikes until there is a better sense that a lot of that slack has been absorbed."

After a sharp decline last year that helped drive down the jobless rate, the labor force has been holding steady despite expectations some of the more than one million long-term unemployed whose benefits expired at the end of 2013 could stop searching for work. If they did, they would no longer be considered as unemployed and in the labor market.

"So far there hasn't been an apparent impact on labor force participation," said Ted Wieseman, an economist at Morgan Stanley in New York. "If there has, it's been more than offset by better job prospects drawing other discouraged workers back into the labor market."

The private sector is expected to account for all the employment gains in March, with government payrolls likely to have dropped by 5,000 jobs.

Manufacturing employment is expected to have risen 7,000 after increasing 6,000 in February. Factory job growth has slowed since surging in November. Construction payrolls are expected to post a third straight month of gains.

Average hourly earnings probably rose 0.2 percent in March after rising 0.4 percent the prior month, the poll found, while the length of the workweek likely increased to an average of 34.4 hours from 34.2 hours in February - another bullish sign.

(Reporting by Lucia Mutikani; Editing by Dan Grebler)

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