Payrolls Probably Fell in June as U.S. Government Cut Staffing for Census

Employment fell in June for the first time this year, reflecting a drop in federal census workers as the decennial population count began to wind down, economists said before a report this week.

Payrolls declined by 110,000 last month, according to the median estimate of 51 economists surveyed by Bloomberg News ahead of a Labor Department report July 2. Private employment, which excludes government jobs, rose for a sixth consecutive month, the survey showed.

The pace of hiring indicates it will take years for the world’s largest economy to recover the more than 8 million jobs lost during the recession that began in December 2007. The turmoil in financial markets brought on by the European debt crisis raises the risk that employment will slow, depriving American households of the income needed to maintain spending.

“There is a somber tone that’s returned to the U.S. economic outlook since the start of the European debt crisis,” said Ellen Zentner, a senior U.S. economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “Financial-market volatility makes businesses think twice about hiring. Spending will slow in the third quarter.”

The Census Bureau says it let go about 243,000 of the temporary workers who helped in conducting the population count from mid-May to mid-June. Peak census employment reached about 586,000 in early May, indicating additional cuts to come that will keep distorting the payroll figures for months.

Private Payrolls

For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. Employment at companies rose by 113,000 after a 41,000 gain in May, according to the median forecast of 29 economists surveyed.

The report will probably also show the unemployment rate rose to 9.8 percent last month, according to the survey median, from 9.7 percent. Joblessness, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs.

Factory payrolls increased in June for the sixth straight month, according to the survey. Service providers have also been adding to headcounts this year.

Delta Air Lines Inc., the world’s biggest carrier, will hire 700 airport ticket and gate agents to help handle increased summer traffic and operations disrupted by weather, Chris Kelly, a Delta spokeswoman, said June 18 in an interview. The additions are in addition to the 300 pilot and 300 reservation agent jobs recently filled by the Atlanta-based airline.

Factory Rebound

Manufacturers in the U.S. are reaping the benefits of the global recovery. Deere & Co., the world’s largest farm equipment maker, last month reported second-quarter profit that topped analysts’ estimates and raised earnings and sales forecasts for a second time this year as demand improved.

Farm-machinery sales in the U.S. and Canada will gain 5 percent to 10 percent for the year and South American farm- equipment sales are projected to jump about 25 percent because of improvements in the Brazilian and Argentinean markets, Deere said.

“Clearly the markets are improving and there’s a lot of good news out of Brazil,” Susan Karlix, a Deere spokeswoman, said May 19 on a conference call with analysts.

On July 1, the Institute for Supply Management’s manufacturing index will show factories expanded in June for an 11th consecutive month, according to economists surveyed. Manufacturing accounts for about 11 percent of the economy.

Manufacturers’ Shares

The manufacturing rebound has helped underpin shares. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Inc. and Deere, has increased 7.8 percent so far this year compared with a 3.4 percent decline in the broader S&P 500.

Household spending climbed 0.1 percent in May after being little changed the prior month, economists projected a report from the Commerce Department tomorrow will show. Incomes likely rose 0.5 percent, the biggest gain in a year, as an increase in hours and average earnings more than made up for a smaller increase in employment, the report will also show.

The Federal Reserve last week said slowing inflation and the fallout from Europe’s debt crisis where among reasons it will maintain interest rates low for “an extended period.”

The central bank said the labor market is “improving gradually,” changing April’s assessment that it was “beginning to improve.” Consumer spending still “remains constrained” by joblessness and “tight credit,” it said.

Tax Credit

Housing is feeling the effects of the end of a homebuyer tax credit, figures may show. Construction spending, due from the Commerce Department on July 1, fell 0.7 percent in May after a gain of 2.7 percent, economists projected.

The following day, the National Association of Realtors will publish its index of signed purchase agreements, or pending home resales, which will show a 14 percent decline in May after three months of gains, according to the survey.

Another report from S&P/Case-Shiller on June 29 may show an index of average home prices in 20 cities rose 3.5 percent in April from a year earlier.

                       Bloomberg Survey

==============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Pers Inc MOM%             6/28      May       0.4%      0.5%
Pers Spend MOM%           6/28      May       0.0%      0.1%
Case Shiller Monthly YO   6/29     April      2.4%      3.5%
Consumer Conf Index       6/29      June      63.3      62.9
Chicago PM Index          6/30      June      59.7      59.0
Initial Claims ,000’s     7/1      26-Jun     457       455
ISM Manu Index            7/1       June      59.7      59.0
Construct Spending MOM%   7/1       May       2.7%     -0.7%
Pending Homes MOM%        7/1       May       6.0%     -14.4%
Nonfarm Payrolls ,000’s   7/2       June      431       -110
Private Payrolls ,000’s   7/2       June       41       113
Manu Payrolls ,000’s      7/2       June       29        25
Unemploy Rate %           7/2       June      9.7%      9.8%
Hourly Earnings MOM%      7/2       June      0.3%      0.1%
Factory Orders MOM%       7/2       May       1.2%     -0.5%
==============================================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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