Employment Probably Cooled in October, Showing U.S. Recovery Must Quicken
Employment probably cooled in October, indicating the U.S. recovery remains too weak, economists said before reports this week.
Payrolls climbed by 95,000 workers after a 103,000 September increase, according to the median forecast of 65 economists surveyed by Bloomberg News ahead of Nov. 4 data from the Labor Department. The jobless rate was 9.1 percent for a fourth consecutive month, the report may also show.
Hiring slowed even as the economy grew in the third quarter at the fastest pace in a year, showing why some Federal Reserve policy makers have said in advance of their meeting this week that the central bank should be prepared to do more. While retailers like Macy’s Inc. (M) are boosting staff ahead of the holidays, bigger job gains are needed to spur consumer spending.
“Yes, there’s job growth, but it’s not good enough,” said Jonathan Basile, an economist at Credit Suisse in New York. “We have a labor market that is very frustrating for policy makers. They’ve tried a bunch of things but the unemployment rate remains elevated.”
The jobless rate has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948.
Private payrolls, which exclude government jobs, rose 125,000 after a gain of 137,000 in September, economists forecast the Labor Department report will show.
The projected gain in total payrolls would bring the average for July through October to 96,000, compared with 131,000 in the first six months of the year.
Sustained increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Through September, the economy had recovered about 2.09 million of the 8.75 million jobs lost as a result of the 18- month recession that ended in June 2009.
Faster hiring would spur bigger gains in incomes and bolster confidence, helping cushion against declines in home prices and allowing households to sustain their spending. Purchases grew at a 2.4 percent annual rate in the third quarter and the economy expanded at a 2.5 percent pace, the Commerce Department reported last week.
Investors are turning more optimistic about the global economic outlook as Europe takes steps to limit the damage from its credit crisis. The Standard & Poor’s 500 Index last week extended its biggest monthly rally since 1974 as European leaders agreed to expand a bailout fund to $1.4 trillion and American growth accelerated.
Some retailers are betting last quarter’s gain in spending will be sustained during the November-December holiday shopping season. Macy’s, the second-biggest U.S. department-store chain, is stepping up hiring of mostly part-time employees by 4 percent for the period. Kohl’s Corp. (KSS), the fourth-largest U.S. department-store chain, plans to add more than 40,000 holiday workers, a 5 percent gain from 2010.
President Barack Obama is seeking ways to take action to spur hiring without congressional approval after the Senate blocked his $447 billion proposal. The plan included expanding a payroll tax break due to expire at the end of 2011, lifting spending on public works and extending jobless benefits.
Fed officials pledged in August to hold the benchmark interest rate near zero at least through the middle of 2013 so long as joblessness stays high and the inflation outlook is subdued. On Sept. 21, the central bank announced a plan to replace debt in its portfolio with longer-term Treasuries to help cut borrowing costs. Policy makers meet on Nov. 1 and 2.
Fed Vice Chairman Janet Yellen, Governor Daniel Tarullo and Federal Reserve Bank of New York President William C. Dudley were among the policy makers this month saying additional stimulus by the central bank may be needed.
Some companies continue to pare staff. Whirlpool Corp. (WHR), the world’s largest maker of household appliances, said it planned to cut more than 5,000 jobs and trimmed its earnings forecast. The workforce reductions will be primarily within North America and Europe and include the closure of the refrigeration manufacturing site in Fort Smith, Arkansas, by mid-2012.
“We are taking necessary actions to address a much more challenging global economic environment,” Chief Executive Officer Jeff Fettig said in a statement on Oct. 28.
One bright spot for the recovery is manufacturing, which accounts for about 12 percent of the economy. A report on Nov. 1 may show the Institute for Supply Management’s factory index rose to 52 this month from 51.6 in September, according to the Bloomberg survey median. A reading above 50 signals expansion.
Economists also projected the Tempe, Arizona-based ISM group’s gauge of service industries, due on Nov. 3, climbed to a five-month high of 53.6 in October.
Bloomberg Survey ============================================================== Release Period Prior Median Indicator Date Value Forecast ============================================================== Construct Spending MOM% 11/1 Sept. 1.4% 0.3% ISM Manu Index 11/1 Oct. 51.6 52.0 ISM NonManu Index 11/3 Oct. 53.0 53.6 Factory Orders MOM% 11/3 Sept. -0.2% -0.1% Nonfarm Payrolls ,000’s 11/4 Oct. 103 95 Private Payrolls ,000’s 11/4 Oct. 137 125 Manu Payrolls ,000’s 11/4 Oct. -13 4 Unemploy Rate % 11/4 Oct. 9.1% 9.1% ==============================================================
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