By Emily Kaiser

WASHINGTON (Reuters) - The U.S. economy appears tobe trudging along, neither booming nor busting, growingsteadily enough to diminish double-dip recession fears but notquickly enough to bring down unemployment.

That puts the Federal Reserve in a bit of a policypickle. If the economy were clearly backsliding, Fed ChairmanBen Bernanke has made it clear he would not hesitate to provide further support. But what about an economy that ismoving forward, albeit painfully slowly?

Minutes of the central bank's August 10 policy meeting saidseveral officials felt the outlook would have to deteriorate"appreciably" to trigger more action, which might includeadditional purchases of government debt or a promise to keepinterest rates near zero for an even longer stretch.

The latest batch of data -- particularly the employmentreport Friday that showed stronger-than-expected privatehiring in August -- doesn't seem to fit that description.

"Is there enough here to prompt the Fed to pull the triggeras early as at the Sept. 21 meeting? Probably not," said LenaKomileva, an economist with Tullett Prebon in London.

So what might make the Fed flinch?

Neil Dutta, an economist with Bank of America-Merrill Lynchin New York, thinks the slow-but-steady economic slog willeventually prod the Fed into action, perhaps early next year.

His firm predicts a "growth recession," which may soundlike an oxymoron but essentially sums up what is happening now.The economy keeps growing, yet unemployment rises.

Dutta said if monthly employment figures continue to showonly modest hiring and rising unemployment, "the Fed is notgoing to sit idle."

Indeed, many economists think the Fed will feel compelledto step in if unemployment surpasses the recession high of 10.1percent notched in October 2009. The rate rose to 9.6 percentin August, and is likely to inch higher in the coming months.

The White House is searching for new ideas that might helpreduce the stubbornly high unemployment rate, and PresidentBarack Obama said he would outline plans to boost the economythis week. Tax cuts to encourage hiring are expected to beamong the proposals, but they would require support fromRepublicans in Congress.

Dutta pointed out that there are "good" and "bad" reasonsfor unemployment to rise. The "good" kind, like now, is causedby more people feeling confident enough about job prospects toventure back into the labor force. The "bad" kind is driven byincreased job cuts. The first type might not spur the Fed intoaction; the "bad" kind almost certainly would.

On Wednesday, the Fed will release its "Beige Book" reportof anecdotal economic evidence gathered from its 12 regionalbanks, which will provide insight into what is and isn'tworking well.

The report drills down to details as specific as Broadwayshow ticket sales, rural crop conditions and vacation resortbookings, and Fed officials routinely cite the findings whenthey discuss their views on the economy.

The last report, released in late July, added to double-dipfears because some Fed districts reported the economy wasslowing. An upbeat report would support the idea the economyregained some momentum after a sluggish second quarter andencourage a wait-and-see approach from the Fed.

TRADING PLACES

Trade was by far the biggest drag on second-quarter U.S.growth, which registered a lackluster 1.6 percent annual pace.A surge in imports subtracted nearly 4.5 percentage points fromgross domestic product. Because GDP measures domestic growth,imports count as a negative.

Thursday's July trade report is expected to show the gapnarrowed slightly, which would ease pressure on third-quartereconomic growth.

Michael Gapen, an economist with Barclays Capital in NewYork, said the third quarter appeared to be off to a"respectable start" and growth will likely be modestly strongerthan in the second quarter.

The Fed's Bernanke would seem to agree. He pointed out inlate August that the spike in imports was probably due tofleeting factors, and economic growth should pick up.

If growth doesn't accelerate, however, that would be onemore plausible trigger for renewed Fed action.

China may offer a big clue about whether U.S. importsreally are subsiding. It is scheduled to release trade figuresfor August Friday, and those are likely to show anothermonth of explosive gains in exports. Economists polled byReuters think China's exports rose 35 percent, while importsincreased a relatively modest 26.1 percent. (Editing by Dan Grebler)