Hiring Probably Limited by Slowing Growth: U.S. Economy Preview
The pace of hiring in July probably failed to reduce the U.S. jobless rate, which has been stuck above 8 percent for more than three years, economists said before a report this week.
A payroll increase of 100,000 workers would follow an 80,000 gain in June, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Labor Department figures Aug. 3. Unemployment is projected to hold at 8.2 percent. Other data this week may show manufacturing stagnated in July and consumer confidence fell for a fifth month.
Federal Reserve policy makers will meet ahead of the jobs report to decide whether additional stimulus is needed to combat a slowing economy as Europe’s debt crisis lingers. Companies such as Lockheed Martin Corp. (LMT) are among those warning they’ll have to reduce headcounts later this year in the run up to the so-called U.S. fiscal cliff of automatic tax increases and government spending cuts.
“The pace of hiring is pretty lackluster,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “It’s going to be a painfully slow grind lower on the unemployment rate. Firms have become cautious as the U.S. is slowing a fair bit and global markets are getting worse.”
Payroll gains slowed to an average 75,000 in the April to June period, down from 226,000 in the first quarter and the weakest in almost two years, Labor Department figures show.
The jobless rate has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.
“Given that growth is projected to be not much above the rate needed to absorb new entrants to the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow,” Fed Chairman Ben S. Bernanke said in testimony to Congress this month. The central bank is “prepared to take further action as appropriate to promote a stronger economic recovery.”
Stocks climbed for a third straight week on speculation that European policy makers may take steps to ease the region’s debt crisis. The Standard & Poor’s 500 Index gained 1.7 percent last week to close at 1,385.97 on July 27.
A Commerce Department report July 27 showed gross domestic product grew at a 1.5 percent annual rate in the second quarter after rising at a 2 percent pace in the first three months of the year.
Household purchases, which account for about 70 percent of GDP, also grew 1.5 percent, the slowest pace in a year and down from a 2.4 percent advance from January to March.
Americans remained cautious about spending in the final month of the quarter, Commerce Department figures may show on July 31. Purchases rose 0.1 percent in June following no change in May, even as incomes climbed 0.4 percent, the most in three months, according to the Bloomberg survey median.
The soft outlook on employment is damping moods. The Conference Board’s index of consumer confidence fell in July for a fifth consecutive month, the longest period of declines since the first half of 2008, economists forecast before the July 31 report.
The fiscal cliff raises the risk some employers will cut back. Lockheed Martin, the world’s largest defense contractor, may have to dismiss about 10,000 of its 120,000 employees if lawmakers don’t act before $1.2 trillion in across-the-board cuts to federal spending, said Robert Stevens, the Bethesda, Maryland-based company’s chief executive officer.
“Our best judgment is that we may have to notify a substantially higher number of our employees beginning late in the third quarter of this year that they may not have a job if sequestration takes place,” Stevens said in July in prepared testimony for lawmakers.
Manufacturing, a pillar of the recovery, may also offer less support to hiring and investment as global demand softens. The Institute for Supply Management Inc.’s factory index rose to 50.2 from 49.7 in June, according to the Bloomberg survey median. A reading of 50 is the dividing line between expansion and contraction. The report will be released on Aug. 1.
The Tempe, Arizona-based ISM group’s services index, which covers almost 90 percent of the economy, was little changed in July from the prior month’s 52.1 reading that was the weakest since January 2010, according to economists surveyed. The gauge is due on Aug. 3.
Bloomberg Survey ================================================================ Release Period Prior Median Indicator Date Value Forecast ================================================================ Pers Inc MOM% 7/31 June 0.2% 0.4% Pers Spend MOM% 7/31 June 0.0% 0.1% Case Shiller Monthly YO 7/31 May -1.9% -1.5% Chicago PM Index 7/31 July 52.9 52.4 Consumer Conf Index 7/31 July 62.0 61.4 ADP Payroll ,000’s 8/1 July 176 120 ISM Manu Index 8/1 July 49.7 50.2 ISM Prices Index 8/1 July 37.0 40.5 Construct Spending MOM% 8/1 June 0.9% 0.4% Vehicle Sales Mlns 8/1 July 14.1 14.0 Domestic Vehicles Mlns 8/1 July 11.1 11.0 Initial Claims ,000’s 8/2 28-Jul 353 370 Cont. Claims ,000’s 8/2 21-Jul 3287 3278 Factory Orders MOM% 8/2 June 0.7% 0.5% Nonfarm Payrolls ,000’s 8/3 July 80 100 Private Payrolls ,000’s 8/3 July 84 110 Manu Payrolls ,000’s 8/3 July 11 10 Unemploy Rate % 8/3 July 8.2% 8.2% ISM NonManu Index 8/3 July 52.1 52.2 ================================================================
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