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Brighter US Economy Makes Fed Tapering More Likely

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ Signs of improvement in the U.S. economy emerged this week, and the jobs report the government will issue Friday will show whether that strength is fueling consistent hiring gains.

The August employment report will be the most significant economic data to be released before the Federal Reserve meets Sept. 17-18. Many economists expect the Fed to decide then to slow its monthly bond purchases.

Analysts predict a solid gain of 177,000 jobs for August, above total but just below the monthly average this year of 192,000. The unemployment rate is expected to remain 7.4 percent.

Many economists were encouraged by data released this week. Reports showed that services companies are stepping up hiring and that a dwindling number of people are losing jobs.

Americans are buying more cars than at any time since the recession began in December 2007. And U.S. factories expanded in August at their fastest pace in more than two years.

This year's steady job growth, along with declining layoffs, has helped lower the unemployment rate to 7.4 percent from 7.9 percent in January. It also means more Americans are earning paychecks and will likely boost consumer spending in coming months.

The improved jobs picture is a key reason most economists expect the Fed to scale back its bond buying. The Fed's $85 billion a month in Treasury and mortgage bond purchases have helped keep home-loan and other borrowing rates ultra-low to try to encourage consumers and businesses to borrow and spend more.

Chairman Ben Bernanke has said the Fed could begin slowing its bond purchases by year's end if the economy continues to strengthen and end the purchases by mid-2014. After its September policy meeting, the Fed will announce whether it will taper its monthly purchases and, if so, by how much.

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