Oil hovered above $68 a barrel on Friday, eyeing a U.S. jobs report due later for some clarity on the economy of the world's top energy user as it struggles to emerge from recession.

The U.S. non-farm payrolls report for August is expected to show employers expected cut jobs by the least amount in a year. [nN01485399]

By 0225 GMT, U.S. crude for October delivery was up 14 cents at $68.10 a barrel, after settling at $67.96 on Thursday. London Brent crude rose 10 cents to $67.22 a barrel.

Even after three days of not much change, oil is set for a 6.3 percent fall this week, its biggest weekly decline in eight weeks.

We're seeing directionless trading today ahead of the U.S. employment report, said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.

The big issue is that a lot of the economic indicators have shown improvement, except for the employment numbers, and high unemployment figures are bad for overall oil demand.

Data on Thursday offered a conflicted picture of the world's largest economy.

The contraction in the U.S. services sector eased last month, with a gauge of activity hitting its highest point in 11 months, but a separate U.S. government report showed initial claims for state jobless benefits fell by 4,000 to 570,000 last week.

The Labor Department will release the August employment report at 1230 GMT later. Economists polled by Reuters forecast 225,000 jobs were lost last month, compared with a loss of 247,000 jobs in July.

The unemployment rate is expected to be 9.5 percent, compared with a 9.4 percent rate in July.

There was little impetus from current or equity markets after Wall Street on Thursday snapped a four-day losing streak, with Japan's Nikkei stock average 0.2 percent lower on Friday in cautious trade.

The U.S. dollar was modestly firmer on the yen and euro early on Friday.

(Editing by Michael Urquhart)

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