By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth likely slowed sharply in November as superstorm Sandy disrupted economic activity, making it hard get a clear picture of a labor market that has also been hobbled by fears of government austerity.
Nonfarm payrolls are expected to have increased only 93,000 last month, a sharp step-down from October's 171,000 job gain, according to a Reuters survey of economists. The unemployment rate is seen holding steady at 7.9 percent.
That would be the fewest number of jobs in five months, but economists blame the anticipated pull-back on the monster storm, which lashed the densely populated East Coast late in October.
While they expect a bounce-back in December, the pace of job growth is expected to remain languid given the economic uncertainty created by the so-called fiscal cliff.
"It is important to remember that the impact of Sandy on total nonfarm payrolls is temporary and should not be blamed for the woes of the current labor market recovery," said Lewis Alexander, chief economist at Nomura Securities in New York.
The Labor Department will release the November jobs data on Friday at 8:30 a.m. EST (1330 GMT). The late October storm helped hold back consumer spending and industrial production during the month, while spurring a drop in wages.
While it is difficult to quantify the storm's influence on payrolls in November, economists estimate it could subtract anything between 25,000 and 75,000 jobs.
But businesses already had been showing a reluctance to spend and hire, fearful the government may fail to steer clear of the $600 billion in automatic tax hikes and government spending cuts set to take hold at the start of next year.
Payroll growth averaged 170,000 per month over the last three months, but economists said Sandy put that out of range for November.
"Had we not experienced the kind of disruption that Sandy brought to bear, we would have seen at least a recurrence if not an increase in the number of jobs added in November," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.
"The underlying trend temporarily got disrupted by the storm, but it's still a very tepid recovery."
BUDGET TALKS KEY
Given the anticipated volatility in the report, policymakers at the Federal Reserve are unlikely to attach too much weight to it when they meet next Tuesday and Wednesday to assess the economy and deliberate on monetary policy.
Economists said officials at the U.S. central bank would keep a close eye on the budget talks in Washington, where lack of progress should encourage them to stay on their ultra-easy monetary policy path.
A persistently weak labor market led the Fed in September to launch a program to buy $40 billion worth of mortgage-backed securities every month. It said it would keep buying until there was a sustained improvement in the jobs market.
Those purchases, aimed at driving down borrowing costs, come on top of the $45 billion a month the Fed is buying in long-term Treasuries with proceeds from sales of shorter-term debt.
That program expires at the end of the year and the Fed is expected to replace it by creating money to buy more Treasuries.
"Even absent Sandy, the economy is not growing at the rate they would like to see so that is reason for them to continue with more quantitative easing," said Torsten Slok, chief international economist at Deutsche Bank Securities in New York.
A spike in first-time applications for state unemployment benefits, especially in New York and New Jersey, in the two weeks after the monster storm, probably offered an early glimpse into the Sandy's potential toll on November payrolls.
Economists said some employers affected by the storm were probably unable to respond to the Labor Department's monthly jobs survey, and that the government would likely have to make some guesses as to the storm's impact.
According to economists, the department faced this problem in 2005 when Hurricane Katrina devastated the Gulf Coast. In that instance, it greatly over-estimated the storm's impact and some economists think it may do so again, with subsequent payroll data being revised higher.
Sandy may have hurt retail employment, while temporary help hiring and construction payrolls probably got a boost from storm-related clean-up and rebuilding efforts. A rise in homebuilding, thanks to the Fed's loose policy stance, is another reason to look for an increase in construction jobs.
Manufacturing employment was probably flat in November, while economists said government payrolls likely fell by 2,000. While average hourly earnings are expected to have edged up and the workweek to have held steady, the risks are to the downside, economists said.
(Reporting by Lucia Mutikani; Editing by Tim Ahmann and Leslie Gevirtz)