HARTFORD, Connecticut - Two Federal Reserve officials said on Friday they would like to see the U.S. jobs picture improve before the central bank withdraws its extraordinary support for the economy and markets.

The comments from Boston Federal Reserve Bank President Eric Rosengren and St. Louis Federal Reserve Bank President James Bullard came the same day government data showed U.S. employers unexpectedly cut 85,000 jobs in December. The December unemployment rate was unchanged at 10 percent.

Rosengren told a business conference in Hartford, Connecticut, that he expects the labor market will improve only slowly, with the unemployment rate likely remaining quite elevated in the early phases of the recovery. He said that with the economy still weak and the unemployment rate high, the Fed's accommodative policy stance is appropriate.

Bullard told students at a university forum in Shanghai that the U.S. economy was improving, but policies to support the recovery should not be withdrawn yet.

We'd like to see unemployment stabilize and other elements of the real economy move into positive territory so that you've got strong growth in 2010, Bullard said.

The Fed cut its benchmark interest rate to near zero in December 2008 and put in place an array of liquidity and purchase programs to fight the worst recession in some 70 years. The U.S. central bank has vowed to keep rates low for an extended period.

Markets are closely watching for clues on the timing of the Fed's exit from its extraordinary economic and financial support. Most analysts don't expect the Fed's policy-setting panel to raise interest rates before the second half of 2010.

The Fed's policy-setting Federal Open Market Committee consists of the seven members of the Washington-based Board of Governors, the president of the Federal Reserve Bank of New York and four other regional Federal Reserve Bank presidents who serve one-year terms on a rotating basis.

Bullard and Rosengren's views are of particular interest to markets this year as the two regional Fed presidents have rotated into voting slots.

Rosengren, seen as one of the more growth-focused doves among top Fed officials, was fairly pessimistic on the recovery's prospects.

He pointed to the high unemployment rate, as well as cautious consumers and businesses and continued banking strains, as significant economic headwinds. These headwinds mean the Fed should be in no rush to tighten policy, Rosengren said.

With significant capacity in labor markets, wages and salaries and the ability of businesses to increase prices are all likely to be restrained, resulting in little immediate inflationary pressures, Rosengren said.

In my view this should allow for accommodative monetary policy to continue to support the economy until the underlying demand of consumers and businesses becomes self-sustaining, he said.

Bullard, who is sometimes described as a hawkish centrist, agreed that price pressures remain subdued. However, he cautioned that uncertainty about inflation was mounting in the United States.

Inflation remains low in the U.S., but inflation uncertainty is higher than before, he said.

(Editing by Chizu Nomiyama and Padraic Cassidy)

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