By Lucia Mutikani
WASHINGTON (Reuters) - Employers likely kept up a steady pace of hiring in June and the jobless rate probably dipped, which could keep the Federal Reserve on track to start curtailing its monetary stimulus later this year.
Nonfarm payrolls are expected to have increased by 165,000 last month, according to a Reuters survey of economists.
While the anticipated rise would be a bit below May's tally of 175,000 jobs, it would be higher than the monthly average of 155,800 over the past three months. The unemployment rate is expected to fall a tenth of a percentage point to 7.5 percent.
June's employment report will come two weeks after Fed Chairman Ben Bernanke said the U.S. central bank expected to trim its bond purchases later this year and to halt the program by mid-2014, as long as the economy progresses as it expects.
The report, which will be released by the Labor Department on Friday at 8:30 a.m. (1230 GMT), is always closely watched by investors around the globe. But with progress in the job market the key to the Fed's plans, Friday's data will likely receive heightened scrutiny.
"They are happy with anything in the 150,000 to 200,000 range at this point as long things don't deteriorate," Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York, said of Fed policymakers. "There is nothing in the data that suggests we are going to switch pace, one way or the other."
Pointing to little deviation from the recent pattern of moderate, steady job growth, first-time applications for unemployment benefits have been treading water.
The job gains forecast for June should be just enough to lower the unemployment rate a notch.
However, economists said there was a chance the labor force could shrink, leading to a bigger-than-forecast drop in the jobless rate, given that the number of people entering the labor force had increased in each of the prior two months.
Those workforce entrants have lifted the participation rate -- the share of working-age Americans who either have a job or are looking for one -- from a 34-year low touched in March.
PRIVATE SECTOR LEADS THE WAY
"Considering the tendency for the household survey data to be volatile, we look for the increase in the unemployment rate from May to be undone in June," said Daniel Silver, an economist at JPMorgan in New York.
Declining participation as older Americans retire and younger people give up the hunt for work in frustration has accounted for much of the drop in the unemployment rate from a peak of 10 percent in October 2009.
The Fed has said it expects the jobless rate to drop to around 7 percent by the middle of next year, when it anticipates ending the bond purchases it has been making to reduce borrowing costs and spur stronger economic growth.
All the anticipated job gains in June will likely come from the private sector, where payrolls are expected to have increased by 175,000, little changed from the prior month.
Government payrolls, in contrast, are expected to shrink by 10,000 jobs last month, although economists said the job losses were not due to the deep government spending cuts known as the sequester.
While the budget cuts that took hold on March 1 do not appear to be hitting government payrolls directly, some economists said they were weighing on private employers and help explain a sharp slowdown in hiring in the health care and social assistance sector.
"There were some signs of a negative sequester impact in parts of the private sector, most noticeably in an unusually weak result for hospitals," said Ted Wieseman, an economist at Morgan Stanley in New York.
"That resulted in an unusually muted gain in the normally steadily growing and non-cyclical healthcare industry."
Manufacturing payrolls are expected to be flat after three straight months of declines. But there is a high risk of another contraction after a gauge of national factory employment released on Monday tumbled to a near four-year low in June.
Construction employment likely added to May's gains as the housing recovery pushes ahead, but it remains constrained by a still-sluggish nonresidential sector.
Other details of the report are expected to show average hourly earnings rose by 0.2 percent after being flat in May. Tepid wage growth is holding back the consumer-driven economy.
"This economy can't grow sharply unless wages and salaries grow much more rapidly," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The length of the average workweek is expected to have held steady at 34.5 hours.
(Reporting by Lucia Mutikani; Editing by Dan Grebler)