U.S. Probably Added Fewer Workers in May as Economy Cooled

Employers probably hired fewer workers in May, a sign U.S. businesses are losing confidence as the world’s largest economy cools, economists said before a report today.

Payrolls rose by 165,000, the smallest gain in four months, after increasing 244,000 in April, according to the median of 89 estimates in a Bloomberg News survey. The jobless rate may have partially reversed April’s advance, falling to 8.9 percent from 9 percent.

Companies may try to restrain labor costs amid concern consumer spending, which accounts for about 70 percent of the economy, will keep slowing as households contend with rising food and fuel expenses. The recovery’s failure to create more jobs raises the odds Federal Reserve policy makers will hold interest rates close to zero into next year.

“The economy has slowed, and employment has slowed as well,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Policy makers will “continue emphasizing that they’ll keep interest rates on hold for a very long time.”

The Labor Department’s data are due at 8:30 a.m. in Washington. Bloomberg payroll survey estimates ranged from increases of 65,000 to 250,000. Projections in the Bloomberg survey for the unemployment rate ranged from 8.7 percent to 9.1 percent.

Treasuries Rise

In addition to companies, investors may be losing confidence in the speed of the economic expansion. The Standard & Poor’s 500 Index has dropped 3.7 percent since the end of April.

Treasuries rose before the report, headed for a third consecutive weekly advance. Ten-year yields were two basis points lower at 3.02 percent as of 9:13 a.m. in London, according to Bloomberg Bond Trader prices. The Stoxx Europe 600 Index was little changed at 274.60.

Private payrolls, which exclude government positions, grew 175,000, according to the survey median. Manufacturing employment gains probably slowed to 10,000 after a 29,000 increase in April, the figures may show.

Manufacturing grew in May at the slowest pace in more than a year, according to Institute for Supply Management data this week, reinforcing concern the industry that led the U.S. recovery is cooling. Consumer spending grew less than forecast in April as households felt the pinch of grocery and energy costs, a Commerce Department report showed.

Fed Response

Economic growth slipped to a 1.8 percent annual pace in the first three months of the year from 3.1 percent in the prior quarter, revised figures from the Commerce Department showed last week.

Economists including Feroli said the wave of weak economic data may spur Fed policy makers to support growth by making it clear after their June meeting they’re in no hurry to shrink the central bank’s record balance sheet. The Fed’s second $600 billion round of asset purchases ends this month, and it may keep reinvesting proceeds from maturing debt, they said. The Fed next meets June 21-22.

“The current accommodative stance of U.S. monetary policy continues to be appropriate because the unemployment rate remains elevated and inflation is expected to remain subdued over the medium run,” Fed Vice Chairman Janet Yellen said in a Tokyo speech this week.

Factory Closures

Companies still reducing their workforce include H.J. Heinz Co., the world’s biggest ketchup maker, which in May announced plans to slash as many as 1,000 jobs worldwide and close five factories. Dean Foods Co. (DF), the largest U.S. milk processor, said it cut 600 positions last quarter and 140 early this quarter.

At the same time, jobs are being created as some businesses expand. General Electric Co. (GE)’s finance unit in May said it will add 1,000 people to its Chicago-area operations, mostly new hires, as commercial lending improves in the Americas. About 500 will be hired in 2012, with another 500 over the next several years, Fairfield, Connecticut-based GE said. The company also announced last month that it will open a locomotive plant employing more than 500 people in Fort Worth, Texas.

Job creation remains the most important factor during the economic recovery, but we do anticipate that it’s continuing to improve,” Don Johnson, vice president of U.S. sales at General Motors Co. (GM), said on a June 1 teleconference. “The environment for future hiring and investment does continue to be positive.”

                         Bloomberg Survey

==============================================================
                           Nonfarm  Private     Manu Unemploy
                          Payrolls Payrolls Payrolls     Rate
                            ,000’s   ,000’s   ,000’s        %
==============================================================
Date of Release              06/03    06/03    06/03    06/03
Observation Period             May      May      May      May
--------------------------------------------------------------
Median                         165      175       10     8.9%
Average                        160      169        8     8.9%
High Forecast                  250      275       25     9.1%
Low Forecast                    65       75      -15     8.7%
Number of Participants          89       50       24       85
Previous                       244      268       29     9.0%
--------------------------------------------------------------
4CAST                           85       90     ---      9.0%
ABN Amro                       200      220     ---      8.9%
Action Economics               165     ---         5     8.9%
Aletti Gestielle               200      233       25     8.9%
Ameriprise Financial           130      140        2     9.0%
Banesto                        215     ---      ---      ---
Bank of Tokyo- Mitsubishi      165      180     ---      8.9%
Barclays Capital               190      210       15     8.9%
Bayerische Landesbank          175     ---      ---      8.9%
BBVA                           210      225     ---      9.0%
BMO Capital Markets            170     ---      ---      9.0%
BNP Paribas                     75      100     ---      9.1%
BofA Merrill Lynch             125      145     ---      9.0%
Briefing.com                   140      160     ---      9.1%
Capital Economics              150     ---      ---      8.9%
CIBC World Markets             165     ---         0     9.0%
Citi                           100      185        5     9.0%
ClearView Economics            250      275       25     8.9%
Commerzbank AG                 200     ---      ---      9.0%
Credit Agricole CIB             80     ---      ---      9.1%
Credit Suisse                  120      135     ---      8.9%
Daiwa Securities America       190     ---      ---      8.9%
Danske Bank                    180     ---      ---      ---
DekaBank                       180     ---      ---      8.9%
Desjardins Group               170     ---      ---      9.0%
Deutsche Bank Securities       160      185     ---      8.9%
Deutsche Postbank AG           180     ---      ---      8.9%
Exane                          180     ---      ---      8.9%
Fact & Opinion Economics       170      200     ---      8.9%
First Trust Advisors            90      110      -10     8.9%
FTN Financial                  150     ---      ---      8.9%
Goldman, Sachs & Co.           100     ---      ---      8.9%
Helaba                         180     ---      ---      8.9%
High Frequency Economics       200       75     ---      8.9%
HSBC Markets                   210      230     ---      8.9%
Hugh Johnson Advisors          190     ---        15     8.9%
Ibersecurities                 250     ---      ---      ---
IDEAglobal                     160      175       10     9.0%
IHS Global Insight             135      150     ---      9.0%
Informa Global Markets         130     ---        15     8.9%
ING Financial Markets          100      120       15     8.9%
Insight Economics              200     ---      ---      9.1%
Intesa-SanPaulo                180     ---      ---      8.9%
ITG Investment Research        175      190     ---      ---
J.P. Morgan Chase              175      190        5     8.9%
Janney Montgomery Scott        136      153        0     9.0%
Jefferies & Co.                205      225       10     8.9%
Landesbank Berlin              125     ---      ---      8.9%
Landesbank BW                  220     ---      ---      8.8%
Laurentian Bank                110      120     ---      9.0%
Manulife Asset Management      165     ---        11     8.9%
Maria Fiorini Ramirez           75       95     ---      8.9%
MET Capital Advisors           210     ---      ---      9.0%
MF Global                       90      170      -15     8.9%
Mizuho Securities              175     ---      ---      9.0%
Moody’s Analytics               80      100       10     9.0%
Morgan Keegan & Co.            146     ---      ---      9.0%
Morgan Stanley & Co.           175     ---      ---      9.0%
National Bank Financial        250     ---      ---      8.8%
Natixis                        130     ---      ---      8.9%
Newedge                        145      160     ---      8.9%
Nomura Securities               85      110      -10     9.0%
Nord/LB                        220      230       20     8.9%
OSK Group/DMG                  160     ---      ---      8.8%
Paragon Research               160     ---      ---      9.0%
Parthenon Group                169      189     ---      8.9%
Pierpont Securities            175      195     ---      8.9%
PineBridge Investments         200      245     ---      8.8%
PNC Bank                       135      150       10     8.9%
Prestige Economics             160      190     ---      8.9%
Raiffeisenbank International   200      220     ---      8.9%
Raymond James                  190      220     ---      8.9%
RBC Capital Markets            190      207     ---      9.0%
RBS Securities                 150      175     ---      8.9%
Scotia Capital                 125     ---      ---      8.9%
SMBC Nikko Securities          130      150     ---      9.1%
Societe Generale               160      180     ---      8.7%
Standard Chartered              65       85     ---      9.0%
State Street Global Markets    116      118        7     9.0%
Stone & McCarthy Research      100      115        0     8.9%
TD Securities                  165      185     ---      9.0%
UBS                            125      150     ---      9.0%
UniCredit Research             185     ---      ---      9.0%
Union Investment               200     ---      ---      9.0%
University of Maryland         200      220       10     8.9%
Wells Fargo & Co.              130     ---      ---      8.9%
WestLB AG                      210     ---      ---      8.9%
Westpac Banking Co.            170     ---      ---      9.0%
Wrightson ICAP                 150      170     ---      8.9%
==============================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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