By Alister Bull

WASHINGTON (Reuters) - U.S. job creation will pick up this year as a moderate economic recovery continues, the White House said on Friday, but it faces a key risk from the debt crisis in Europe.

Stronger job growth will aid President Barack Obama as he seeks re-election in November, but his annual economic report warned that the road ahead could be bumpy.

"Only a prolonged and robust expansion can eliminate the large jobs deficit that opened up during the recession, and the economy as a whole has considerable room to grow," the report said.

The euro zone's ongoing debt crisis also represented a potential threat to the U.S. recovery, and the White House warned "significant risks" remain despite steps to tackle the crisis taken by European governments.

Still, recent better-than-expected labor market data have encouraged the White House to upgrade its forecasts for hiring.

Its latest estimate, released after news that U.S. unemployment fell in January to 8.3 percent, projected average growth in U.S. payrolls of 167,000 a month this year.

"At this pace, two million jobs will be created during 2012, an increase from 1.8 million in 2011," the report said.

The actual unemployment rate in 2012 was forecast at 8.9 percent, but the White House has already said this number is "stale" and instead highlighted private sector estimates that the jobless rate could average between 8 percent and 8.6 pct this year.

No U.S. president since the Second World War has won re-election with unemployment above 7.2 percent, when Ronald Reagan clinched a second White House term in 1984 after bringing the jobless rate down to that level from 9.5 percent.

Alan Krueger, Chairman of the White House Council of Economic Advisers, declined to spell out the administration's forecast for the unemployment rate this year, as the president campaigns to win a second White House term.

The White House was slammed for predicting in 2009 that Obama's emergency stimulus measures would hold unemployment beneath 8 percent, which subsequently peaked at 10 percent.

The council adjusts its economic forecasts twice a year - to prepare the president's budget, which was released on Monday, and for an annual midsession review expected in August, and Krueger said he would hold with that tradition.

The White House views exports as an important engine for growth, in part because it expects domestic consumption to steady at the modest expected pace of income growth this year, while government spending is curbed to control the deficit.

"To grow, going forward, the role of exports jumps out at you," Krueger told reporters, noting Obama was on track to meet his goal of doubling U.S. exports by the end of 2014.

(Reporting By Alister Bull; Editing by Neil Stempleman and Stacey Joyce)