* Nonfarm payrolls forecast increasing 180,000 in August
* Unemployment rate seen falling to 4.8 percent
* Average hourly earnings expected to rise 0.2 percent
By Lucia Mutikani
WASHINGTON, Sept 2 U.S. employment growth likely
moderated in August after two straight months of hefty gains,
but was probably still strong enough to push the Federal Reserve
to raise interest rates later this year.
Nonfarm payrolls likely increased by 180,000 jobs last
month, according to a Reuters survey of economists, around this
year's monthly average job growth. The unemployment rate is
forecast falling one-tenth of a percentage point to 4.8 percent.
The Labor Department will release its closely watched
employment report on Friday and readings in line with
expectations would reinforce views that the economy has regained
speed after almost stalling in the first half of the year.
"It would lead people to the conclusion that the economy is
continuing to grow at a moderate pace and to expect a December
rate hike from the Fed rather than September," said David
Donabedian, chief investment officer of Atlantic Trust Private
Wealth Management in Washington.
The report will come more than two weeks before the U.S.
central bank's Sept. 20-21 policy meeting. Rate hike
probabilities for both the September and December meetings have
risen after remarks last Friday by Fed Chair Janet Yellen that
the case for raising rates had strengthened in recent months.
The Fed lifted its benchmark overnight interest rate at the
end of last year for the first time in nearly a decade, but has
held it steady since amid concerns over persistently low
The step-down in employment would come after the economy
created a total of 547,000 jobs in June and July. With the labor
market near full employment and the economy's recovery from the
2007-09 recession showing signs of aging, a slowdown in job
growth is normal.
Yellen has said the economy needs to create just under
100,000 jobs a month to keep up with population growth. There
are, however, risks that August payrolls will undershoot
expectations, given what some economists believe are challenges
adjusting the data for shifts in school calendars.
Over the last several years, the government's August
payrolls estimates have been weak prior to upward revisions. In
addition, the Institute for Supply Management said on Thursday
factory employment declined in August for a second straight
EYES ON WAGES
The timing of the next rate hike could also be determined by
wage growth. Average hourly earnings are expected to have
increased 0.2 percent in August after a solid 0.3 percent rise
in July. But a calendar quirk could mean a soft reading, which
would pull down the year-on-year from 2.6 percent in July.
"The reference week for the payroll survey ended August 13.
Since the 15th of the month falls after the survey period,
increases in bi-monthly pay are less likely to have been
captured, skewing the result lower," said Michelle Girard, chief
U.S. economist at RBS in Stamford, Connecticut. "We expect
average hourly earnings to have been flat."
The labor force participation rate, or the share of
working-age Americans who are employed or at least looking for a
job, will also be scrutinized for signs of when wage growth will
accelerate. Despite some gains, the participation rate remains
near multi-decade lows, in part reflecting demographic changes.
Economists said the low participation rate partially
explains why wage growth has been sluggish.
"We expect the labor market to reach full employment by
early 2017 and to surpass it thereafter," said Elad Pashtan, an
economist at Goldman Sachs in New York.
A solid payrolls gain would add to July consumer spending,
residential construction and durable goods orders in suggesting
a pick up in economic growth after output rose 1.0 percent in
the first half of the year.
The Atlanta Fed is forecasting gross domestic product rising
at a 3.2 percent annual rate in the third quarter.
Last month, manufacturing sector employment was likely flat
after rising for two straight months. Construction payrolls
probably rose for a second consecutive month, while mining
likely shed more jobs in August.
Government payrolls are forecast rising 2,000 in August,
extending the streak of job gains in the public sector to four
(Reporting by Lucia Mutikani; Editing by David Chance and