U.S. jobless numbers likely fell in June for the first time this year, a Reuters poll showed. The key monthly unemployment report will be released on Friday.

REUTERS FORECASTS:

* Median forecast for nonfarm payrolls -110,000 in June versus +431,000 in May. Forecasts range from -200,000 to +30,000.

* Private payrolls seen +112,000 versus +41,000 in May.

* Unemployment rate seen at 9.8 pct versus 9.7 pct. Forecasts range from 9.6 pct to 9.9 pct.

* Average work week for all workers seen steady at 34.2 hours.

FACTORS TO WATCH:

Nonfarm payrolls probably fell in June for the first time this year as many of the 411,000 temporary workers hired in May to complete the census were laid off. According to Census Bureau data, there were 344,157 temporary workers for the decennial population count during the survey week of the closely monitored employment report. That compares to 573,779 temporary workers during the same period in May.

Employment is also seen weighed down by layoffs at cash-strapped state and local governments. However, private hiring -- viewed as a better measure of the labor market's health -- is expected to have picked up in June after a sharp slowdown in May. This should help pacify investors who are increasingly worried about a double-dip recession after some key data suggested the recovery from the worst downturn since the 1930s is losing some edge.

Average weekly hours worked likely remained steady in June, which should also support the fragile recovery. The loss of temporary census jobs is expected to result in a decline in household employment. That, combined with the anticipated return of some discouraged workers back into the labor force, is seen lifting the unemployment rate marginally.

High unemployment is a sore point for President Barack Obama, whose approval ratings have plummeted. The economy's failure to create sufficient employment to absorb the more than 8 million Americans who lost their jobs during the recession, could haunt the Democratic Party in the November mid-term elections.

Labor market strength is one of the factors that will determine the timing of the Federal Reserve's first interest rate hike since slashing overnight lending rates to near zero in December 2008.

MARKET IMPACT

With worries of a double-dip recession uppermost in investors' minds, the employment report will be watched for fresh clues on the strength of the recovery. A recent batch of weak U.S. data and budget troubles in Europe have hurt stock prices, but boosted the appeal of safe-haven U.S. Treasuries.

Treasury yields should fall on a weaker-than-expected report. But yields have fallen near record lows from their peaks in April and analysts caution a rally in government bonds would be short-lived.

A weak report could benefit the U.S. dollar as anxious investors become averse to higher-risk currencies and assets, but hurt the currency against the yen, which also tends to rise on risk aversion.

Key levels to watch for euro/dollar are $1.2150, a break of which could open the way for a retest of $1.2000 and the pair's four-year low around $1.1875 set on June 7. For dollar/yen, the key level is at 88 yen.

(Polling by Bangalore unit)

(Reporting by Lucia Mutikani, Richard Leong and Wanfeng Zhou; Editing by Andrea Ricci)

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