NEW YORK ( TheStreet) -- A strong ADP report on private sector growth, the largely downward trend in jobless claims in recent weeks and signs of returning consumer confidence have raised expectations for a recovery in the job market. On Friday, the Labor Department is expected to report nonfarm payrolls rose by 140,000 in November after an increase of 151,000 in the previous month, according to the consensus estimate of economists polled by Thomson Reuters. Estimates for private sector growth among analysts who spoke to TheStreet ranged from 158,000 to 170,000. On Wednesday, the
ADP National Employment Report said private sector employment rose by 93,000. That number was well ahead of expectations for an addition of 53,000, and it raised hopes for a strong government report on Friday. On Thursday, the Labor Department said initial weekly jobless claims for the week ended Nov. 20 rose by 26,000 to 436,000 after falling to a two-year low the week before. Still, the four-week moving average, which adjusts for week-to-week volatility, edged lower, providing evidence that layoffs might be slowing. General Motors ( GM), General Electric ( GE) and Chrysler were among firms that announced new hiring earlier this week. Jeffrey Kleintop of LPL Financial expects Friday's jobs report to be solid, even slightly better than expectations. "We are seeing what maybe could be the benefits of gridlock. The idea that the legislative environment is going to show a slower pace of change and that encourages businesses to make long-term investments in expanding their businesses but also hiring," he said. Companies have so far shown a reluctance to hire, given an uncertain tax and regulatory outlook. But they have managed to register strong profit growth on the back of labor cuts and improving productivity. Kleintop noted that the Labor Department's latest report on productivity showed gains from productivity had slowed. That means that companies that wish to boost output will probably have no choice but to hire more workers. Still, economists say that while the job market appears to be at the cusp of a recovery, growth in jobs may not be enough to lower the unemployment rate. Mike Schenk, a senior economist at the Credit Union National Association, says the unemployment rate will likely remain stubbornly around 9.5% through 2011, even as the economy adds more jobs in the months ahead.
"The level of growth we are seeing at this point is barely enough to cover new entrants into the job market," said Schenk. He estimates jobs will have to grow at a pace of 400,000 a month to materially lower unemployment -- not something he foresees happening in the next 12 months. Even if the economy manages to add 175,000 jobs on a sustained basis, the better prospects will likely prompt discouraged job seekers to resume their searches, which would keep the unemployment rate elevated. On Wednesday, the Federal Reserve in its beige book report said that economic activity was improving in most districts but that employers still seemed reluctant to hire. "Employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls." On Tuesday, Fed Chairman Ben Bernanke said at a meeting with business leaders in Ohio that the U.S. economy was not growing fast enough to "materially" lower unemployment rate. Schenk says the economy needs to grow between 2.75% to 3% for the job market to be in better shape. "2.5% growth just won't cut it." In the near term, investors will likely focus on the current debate in Congress to reauthorize the federally funded extended unemployment benefits program that expired at the end of November. In response to the recession that began in December 2007, Congress expanded unemployment insurance benefits by creating Emergency Unemployment Compensation (EUC) and 100% federal funding of Extended Benefits (EB). These programs provide unemployment insurance benefits after a worker exhausts state benefits, helping when it takes longer to find a job, such as in this severe downturn. These extensions began to expire this past Tuesday. The extensions have helped 14 million unemployed through October 2010. Close to 5 million people receive benefits under the extended benefits program as of October 2010. The Labor Department estimates that 2 million Americans will lose aid by the end of the year if Congress fails to act on extending unemployment benefits. On Thursday the White House Council of Economic Advisers said in a report that failure to extend the program could result in a loss of 600,000 jobs in 2011 because of a drop in consumption."For the last half-century, Congress has consistently extended UI benefits when economic circumstances were serious enough to make finding a job difficult. Given the current labor market conditions, failing to continue UI extensions now would be unprecedented," the report said. --Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: email@example.com.