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By Bob Willis
Sept. 7 (Bloomberg) -- U.S. job growth picked up in August, suggesting most industries are coping with the housing slump and credit-market rout without firing workers, economists said before a report today.
Employers added 100,000 workers to payrolls after a 92,000 increase in July, according to the median estimate in a Bloomberg News survey of 88 economists. The jobless rate held at 4.6 percent for a second month, according to the survey.
The jump in borrowing costs and lending restrictions brought on by defaults among subprime borrowers will worsen the housing recession, costing more Americans their jobs, economists said. Investors and most economists forecast Federal Reserve policy makers will cut interest rates this month to prevent the economy from slowing even more and stem employment losses.
``The impact of the credit crisis that we saw in August won't be showing up in employment numbers for a few months,'' said Avery Shenfeld, a senior economist at CIBC World Markets Inc. in Toronto. ``The Fed has to cut. They can't afford to wait.''
The Labor Department report is due at 8:30 a.m. in Washington. Payroll forecasts ranged from 35,000 to 140,000. The projected gain in payrolls would mark the smallest back-to-back rise in three years.
A report from the Commerce Department at 10 a.m. may show wholesale inventories rose 0.4 percent in July, according to a Bloomberg survey, after a 0.5 percent gain the prior month.
Retailers, health-care firms and government offices probably increased staff last month, while construction companies, factories and mortgage agencies cut jobs, economists said. Manufacturing employment dropped by 10,000, according to the survey median.
Fed Vigilant
Fed Chairman Ben S. Bernanke last week said the central bank would do what's needed to prevent the credit-market turmoil from undoing the six-year economic expansion.
The Fed ``continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets,'' he said at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming.
Bernanke said the Fed would ``pay particularly close attention to the timeliest indicators'' since data prior to August didn't capture the credit crisis. Futures contracts are pricing a certain cut in the benchmark federal funds rate at the central bank's policy meeting Sept. 18.
The Labor Department's employment survey of businesses covers the week of Aug. 12, at the height of the decline in global stock markets, suggesting the figures won't reflect the full extent of the damage done by the subprime tumult.
Effects `Limited'
The Fed Beige Book, which tracks regional economic trends, said this week the effects of the August credit-market rout on the broader economy were ``limited.'' The survey covered the period through Aug. 27 and said ``economic activity has continued to expand nationwide.''
Hourly wages on average probably rose 0.3 percent last month and were up 3.9 percent from August 2006, the unemployment report is also forecast to show.
Job and wage growth are needed to help sustain consumer spending, which accounts for more than two-thirds of the economy, as home values fall and loans become more difficult to get. Spending slowed to a 1.4 percent annual pace in the second quarter, down from 3.7 percent the previous three months.
Other reports confirm the job market has softened. ADP Employer Services on Sept. 5 said businesses added 38,000 workers in August, the fewest since June 2003. Chicago-based job-search firm Challenger, Gray & Christmas Inc. said the same day that job cuts announced by U.S. employers rose 22 percent last month from a year earlier led by a surge at financial firms.
Firings
First American Corp., the largest U.S. title insurer, said this week it would cut 1,300 jobs, or about 3 percent of its workforce, to reduce costs as home sales slow.
LandAmerica Financial Group Inc., a Richmond, Virginia- based title insurer, said Aug. 28 it will eliminate 1,100 jobs in the second half of 2007 to lower costs as mortgage originations decline.
Lehman Brothers Holdings Inc. and Accredited Home Lenders Holding Co., both in the U.S., and HSBC Holdings Plc in London said last month they would cut a total of 3,400 jobs as tremors from the collapse of the subprime-loan market spread through the economy. At least 15 mortgage companies have filed for bankruptcy and about 50 have stopped lending or shut down entirely.
Declines in residential construction have detracted from overall growth for the last six quarters, and the housing slump is prompting economists to warn of rising risks of recession.
Harvard University economist Martin Feldstein, who heads the group that dates U.S. contractions, said Aug. 31 there is a ``significant risk'' of a recession.
``Downturns in housing construction have almost always been followed by a downturn in the economy, by a recession,'' Feldstein said in an interview from Jackson Hole. ``My judgment is there is enough of a risk that the Federal Reserve should be responding to that risk'' by cutting interest rates.
Bloomberg Survey
FIRM Nonfarm Unemploy Manu Avg Hrly
Payroll Rate Payroll Earnings
------------------------------------------------------------
Number of replies 88 85 21 68
MEDIAN 100 4.6% -10 0.3%
AVERAGE 100 4.6% -11 0.3%
High Forecast 140 4.8% 5 0.6%
Low Forecast 35 4.5% -18 0.2%
Previous 92 4.6% -2 0.3%
------------------------------------------------------------
4CAST Ltd. 115 4.6% n/a 0.3%
Action Economics 120 4.6% -10 0.3%
AIG Global Invest. 135 4.5% n/a 0.4%
Alleti Gestielle SGR 95 4.7% -15 n/a
Allianz Dresdner 100 4.7% n/a 0.3%
Analytical Synthesis 125 4.5% 5 n/a
Argus Research 35 4.6% -15 0.6%
BBVA 115 4.6% n/a 0.3%
BMO Capital Markets 108 4.6% n/a 0.3%
BNP Paribas 75 4.7% n/a 0.3%
B of A Securities 85 4.7% n/a 0.3%
Banca IMI 60 4.7% n/a 0.3%
Bancolombia SA 90 n/a n/a n/a
Bantleon Bank AG 120 4.6% n/a n/a
Barclays Capital 125 4.6% n/a 0.3%
Bear Stearns 100 4.6% n/a 0.3%
BOT- Mitsubishi 115 4.6% -7 0.3%
Briefing.com 130 4.7% n/a 0.3%
Calyon 80 4.6% n/a 0.3%
CFC Group 100 4.6% n/a 0.3%
CIBC World Markets 100 4.6% n/a 0.3%
Citigroup 140 4.6% n/a 0.3%
ClearView Economics 100 4.8% -10 0.3%
Commerzbank 120 4.6% -5 0.3%
Countrywide SEC 100 4.7% -15 0.5%
Credit Suisse 125 4.7% n/a 0.3%
Daiwa Securities 140 4.6% n/a n/a
Danske Bank 120 4.6% n/a n/a
DekaBank 100 4.7% n/a 0.3%
Desjardins Group 100 4.6% n/a 0.2%
Deutsche Bank 70 4.7% n/a 0.3%
Deutsche PostBank 120 4.6% n/a n/a
Dresdner Kleinwort 85 4.7% -18 0.3%
DZ Bank 100 4.7% n/a 0.3%
FIMAT-Cube 102 4.6% n/a 0.3%
FTN Financial 90 4.6% n/a 0.3%
First Trust Advisors 70 4.6% -15 0.3%
Fortis 110 4.6% n/a n/a
Global Insight 110 4.7% n/a n/a
Goldman Sachs 75 4.7% n/a 0.3%
H&R Block Financial 95 4.6% -10 0.2%
High Frequency 100 4.6% n/a 0.3%
HBOS Treasury 100 4.7% n/a 0.3%
HSBC Markets 125 4.6% n/a 0.3%
HSH Nordbank AG 50 4.7% n/a 0.3%
Horizon Investments 85 4.6% n/a 0.2%
IDEAglobal 95 4.6% -10 0.3%
ING Barings 120 4.6% n/a 0.3%
Informa Global 105 4.7% -10 0.3%
Insight Economics 100 4.7% n/a 0.3%
Intesa-SanPaulo 100 4.7% n/a 0.3%
J.P. Morgan Chase 125 4.6% n/a 0.3%
JPMorgan Private 100 4.7% -5 0.2%
Janney Montgomery 87 4.7% n/a n/a
Landesbank BW 100 4.7% n/a n/a
Landesbank Berlin 85 4.7% n/a 0.2%
Lehman 80 4.7% n/a 0.3%
Lloyds TSB 115 4.6% -12 0.3%
Maria Fiorini 85 4.7% n/a 0.3%
Merrill Lynch 65 4.7% n/a 0.4%
MFC Global Invest. 105 4.6% -12 0.2%
Mizuho Securities 70 4.7% n/a 0.2%
Moody's Economy.com 105 4.6% -15 0.3%
Morgan Keegan 95 4.6% n/a n/a
Morgan Stanley 125 4.6% n/a 0.4%
National Bank Fin. 85 4.6% n/a 0.3%
National City Bank 82 4.6% n/a 0.3%
Natixis 80 4.7% n/a 0.3%
Nomura 120 4.6% -10 0.2%
Nord/LB 85 4.6% -15 0.3%
PNC Bank 110 4.7% n/a 0.3%
Putnam 72 4.5% n/a 0.3%
RBS Greenwich Cap. 110 4.6% -7 0.3%
Ried, Thunberg 75 4.7% n/a n/a
Scotia Capital 110 4.7% n/a 0.3%
Skandia 102 n/a n/a n/a
Societe Generale 135 4.6% n/a n/a
Stone & McCarthy 95 4.7% -15 0.3%
TD Securities 95 4.7% n/a n/a
Thomson/IFR 136 4.7% n/a 0.3%
UBS Securities LLC 80 4.7% n/a 0.3%
Unicredit- UBM 130 4.6% n/a n/a
Univ. of MD 105 4.6% n/a 0.3%
Wachovia 110 n/a n/a n/a
Wells Fargo 130 4.6% n/a n/a
WestLB AG 60 4.6% n/a 0.3%
Westpac Banking 95 4.6% n/a n/a
Wrightson 100 4.6% n/a 0.3%
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
Last Updated: September 7, 2007 00:05 EDT
