Gain in Payrolls Probably Failed to Reduce U.S. Unemployment

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 today.

Payrolls climbed by 100,000 workers following an 80,000 increase in June, according to the median forecast of 89 economists surveyed by Bloomberg News. The jobless rate was 8.2 percent for a third consecutive month, the figures may show.

Weakness in job creation will hold back consumer spending, the biggest part of the economy, as a global slowdown and impending U.S. tax changes weigh on businesses. Job cuts at companies from Morgan Stanley to Cisco Systems (CSCO) Inc. mean unemployment may remain elevated, one reason the Federal Reserve this week said it is prepared to take new steps if needed to boost growth.

“Payrolls are growing at a lackluster pace,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The economy remains weak, and we still have quite a few headwinds. Progress on the unemployment rate will be key to further Fed action.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Bloomberg survey estimates ranged from increases of 50,000 to 165,000.

Private employment, which excludes government jobs, climbed 110,000 after rising 84,000 in June, economists forecast the report will show.

Hiring Slowdown

Payroll gains slowed to an average 75,000 in the April to June period, the weakest in almost two years and down from 226,000 in the first quarter, Labor Department figures show.

The jobless rate, derived from a separate survey of households, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.

Fed officials, after meeting this week, left unchanged their statement that economic conditions would likely warrant holding the benchmark interest rate target near zero at least through late 2014. They said unemployment “remains elevated.”

Policy makers “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” the Fed statement said. Economic growth is expected to “remain moderate over coming quarters and then to pick up very gradually.”

Stocks Climb

Stocks climbed for the past two months on speculation global central banks will take measures to bolster growth and employment. The Standard & Poor’s 500 Index yesterday dropped for a fourth day after European Central Bank President Mario Draghi failed to reassure investors on the outcome of policy makers’ immediate efforts.

Through June, the U.S. had recovered about 3.8 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

Employment and the economy are central themes in the presidential campaign, with President Barack Obama and Republican challenger Mitt Romney debating whose policies would best boost the expansion.

Gross domestic product grew at 1.5 percent annual rate in the second quarter after a 2 percent gain in the first three months of the year, according to figures from the Commerce Department. Household purchases, which account for about 70 percent of GDP, grew at the slowest pace in a year.

Today’s report may show manufacturing payrolls grew 10,000 in July, according to the Bloomberg survey median. The figures may reflect fewer shutdowns at automakers for annual retooling related to the new model year. Chrysler Group LLC and Ford Motor Co. (F) are among companies that said they would idle fewer plants.

Auto Sales

Demand for so-called big-ticket items like automobiles may be cooling. Car and light trucks sold at a 14.1 million annual rate in July, down from a revised 14.3 million in June and indicating little momentum as the industry heads for the best year since 2007, according to Ward’s Automotive Group.

“Economic fundamentals have remained soft,” Jenny Lin, Ford’s senior U.S. economist, said on an Aug. 1 conference call with analysts. “Job growth as measured by non-farm payrolls is modest.”

Cisco Systems, the biggest maker of computer-networking equipment, plans to eliminate about 1,300 jobs, or 2 percent of the workforce, as Europe’s debt crisis and sluggish corporate spending threaten sales.

Bank Cutbacks

Financial firms are also trimming jobs as revenue softens. Morgan Stanley (MS) said its headcount will drop by about 700 in the second half, bringing total 2012 reductions to 4,000. Credit Suisse Group AG will eliminate 138 positions in New York starting this month. Deutsche Bank AG will cut about 1,900 jobs by year-end, mostly outside Germany. The lender is also shrinking compensation and benefits.

The so-called fiscal cliff, in which taxes will rise and government agencies will reduce spending next year if Congress doesn’t act, raises the risk of more cutbacks. Lockheed Martin Corp. (LMT), 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, according to Robert Stevens, the Bethesda, Maryland- based company’s chief executive officer.

The Labor Department, in guidance posted on its website, said it would be “inappropriate” for defense companies to send 60-day notices to employees given the uncertainty about whether the reductions will occur or which jobs will be cut.

Honda Motor Co. (7267) is among companies looking to expand. The Tokyo-based auto maker, which relies on U.S. vehicle sales for more than half its profit, said it is investing $40 million at its Greensburg, Indiana, plant that produces the Civic compact and will hire 300 workers later this year.

                        Bloomberg Survey
==============================================================
                           Nonfarm  Private Unemploy ISM Non-
                          Payrolls Payrolls     Rate     Manu
                            ,000’s   ,000’s        %    Index
==============================================================
Date of Release              08/03    08/03    08/03    08/03
Observation Period            July     July     July     July
--------------------------------------------------------------
Median                         100      110     8.2%     52.0
Average                        101      116     8.2%     52.2
High Forecast                  165      180     8.3%     53.0
Low Forecast                    50       80     8.1%     50.5
Number of Participants          89       47       84       73
Previous                        80       84     8.2%     52.1
--------------------------------------------------------------
4CAST                          110      130     8.2%     52.3
ABN Amro                       100      110     8.2%     52.5
Action Economics               110      120     8.2%     52.5
Ameriprise Financial            95      100     8.2%     52.5
Banca Aletti                   118      127     8.2%     53.0
Bank of Tokyo-Mitsubishi       130      140     8.2%     ---
Banorte-IXE                     85     ---      8.2%     52.0
Bantleon Bank AG                97     ---      8.2%     52.2
Barclays                       100      110     8.2%     51.5
Bayerische Landesbank           98     ---      8.2%     52.8
BBVA                           100      105     8.2%     51.9
BMO Capital Markets             90     ---      8.2%     51.9
BNP Paribas                     75     ---      8.3%     51.5
BofA Merrill Lynch              85      100     8.2%     50.5
Briefing.com                    85      100     8.2%     52.0
Capital Economics              100     ---      8.2%     51.5
CIBC World Markets             120     ---      8.2%     ---
Citi                           140      150     8.2%     52.0
ClearView Economics             75       82     8.3%     52.0
Comerica                       110     ---      8.2%     53.0
Commerzbank AG                  90     ---      8.2%     52.5
Credit Agricole CIB             90     ---      8.2%     52.2
Credit Suisse                  110      125     8.2%     51.5
CTI Capital                     97     ---      ---      ---
Daiwa Securities America       125     ---      ---      53.0
Danske Bank                    105     ---      8.2%     ---
DekaBank                        80     ---      ---      52.5
Desjardins Group               100     ---      8.2%     52.0
Deutsche Bank Securities        75       80     8.2%     53.0
Deutsche Postbank AG           100     ---      8.2%     52.5
DZ Bank                         85     ---      8.2%     52.0
Exane                          130     ---      8.2%     52.0
First Trust Advisors           125      135     8.2%     52.7
FTN Financial                   95      105     8.2%     52.0
Goldman, Sachs & Co.           100     ---      8.2%     52.5
Helaba                         100     ---      8.2%     52.8
High Frequency Economics       125      135     8.2%     52.0
Horizon Investments            125     ---      8.2%     53.0
HSBC Markets                   100      110     8.2%     51.5
Hugh Johnson Advisors          102      100     8.2%     51.1
IDEAglobal                     115      120     8.2%     53.0
IHS Global Insight              90     ---      8.2%     52.6
ING Financial Markets          105      115     8.1%     52.7
Insight Economics              125     ---      8.2%     52.0
Intesa Sanpaulo                 90     ---      8.2%     51.5
Iur Capital                     90     ---      8.1%     ---
J.P. Morgan Chase               90     ---      8.2%     52.0
Janney Montgomery Scott         84      100     8.2%     52.9
Jefferies & Co.                 80       90     8.2%     51.5
JH Cohn                         65     ---      ---      ---
John Hancock Financial         112     ---      8.1%     ---
Landesbank BW                   75     ---      8.2%     51.5
Lloyds Bank                    100      110     8.2%     51.6
Maria Fiorini Ramirez          135      140     ---      53.0
Market Securities               75     ---      8.2%     52.0
MET Capital Advisors            50     ---      8.2%     ---
Moody’s Analytics              115      115     8.2%     52.4
Morgan Stanley & Co.           110     ---      8.2%     ---
National Bank Financial         55     ---      8.3%     52.0
Natixis                        110     ---      8.2%     53.0
Newedge                        100      110     8.2%     53.0
Nomura Securities               75       80     8.2%     52.0
OSK Group/DMG                  102     ---      8.2%     51.8
Paragon Research               120     ---      8.2%     ---
Pierpont Securities             85      110     8.2%     51.6
PineBridge Investments         125     ---      8.2%     52.0
PNC Bank                       100      110     8.2%     52.0
Prestige Economics             115      130     8.1%     52.3
Raiffeisenbank International    90      100     8.2%     ---
Raymond James                   90      105     8.2%     52.4
RBC Capital Markets             60       90     8.3%     52.0
RBS Securities                  95      130     8.2%     51.5
Regions Financial               88       94     8.2%     ---
Renaissance Macro Research      80       90     8.3%     ---
Scotiabank                     130     ---      8.3%     51.5
SISR                           164      170     8.1%     ---
SMBC Nikko Securities          150      150     8.2%     52.5
Societe Generale               165      180     8.1%     51.7
Southern Polytechnic State     140      150     8.1%     ---
Standard Chartered             110      120     8.2%     52.2
Stone & McCarthy Research      100      120     8.2%     53.0
TD Securities                  113      118     8.3%     51.5
UBS                            115      125     8.1%     52.5
UniCredit Research              90     ---      8.2%     52.5
Union Investment                97     ---      8.2%     ---
University of Maryland          80       84     8.2%     52.1
Wells Fargo & Co.               77     ---      8.2%     52.4
Westpac Banking Co.             70     ---      8.2%     52.0
Wrightson ICAP                 100      110     8.2%     52.5
==============================================================

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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