Employers in U.S. Probably Expanded Payrolls at Faster Pace
Employers probably picked up the pace of hiring in August and the U.S. jobless rate held at a more than four-year low, signaling a strengthening labor market that will help sustain growth, economists said before a report today.
Payrolls rose by 180,000 following a 162,000 gain the prior month, according to the median forecast of 94 economists in a Bloomberg survey. Unemployment stayed at 7.4 percent, matching the lowest since December 2008, they projected.
Hiring at companies such as Ford Motor Co. (F) and AT&T Inc. (T) is underpinning consumer spending, the biggest part of the economy, and promoting faster growth as the effects of higher taxes and federal budget cuts fade. Federal Reserve officials, who meet Sept. 17-18, are debating whether the expansion and job market have improved enough to warrant trimming monthly bond purchases.
“The labor market continues to make fairly steady progress,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York and a former economist at the Federal Reserve Bank of Richmond. “We still need to do more. The unemployment rate remains elevated. It’s probably a close call here on tapering” of the $85 billion in Fed purchases each month of mortgage-backed securities and Treasuries.
The Labor Department’s report is due at 8:30 a.m. in Washington. Bloomberg survey estimates for payrolls range from increases of 79,000 to 220,000.
Private employment, which excludes government agencies, also climbed 180,000 in August following a 161,000 advance the prior month, economists predicted.
Stocks rose yesterday, with benchmark indexes staging their longest rally since July. The Standard & Poor’s 500 Index increased 0.1 percent to 1,655.08 at the close in New York. Stock-index futures were little changed today before the jobs data, with the contract on the S&P 500 expiring this month up less than 0.1 percent at 6:53 a.m. in New York.
The unemployment rate, derived from a Labor Department survey of households rather than employers, has declined from a post-recession high of 10 percent reached in October 2009.
Overall payroll gains so far this year have averaged about 192,000 a month, up from 180,000 in the second half of 2012. Through July, the U.S. had recovered 6.7 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.
This is the last payrolls report Fed officials will see before their upcoming meeting. Policy makers will probably decide to scale back the pace of bond purchases when they next meet, according to 65 percent of economists surveyed by Bloomberg Aug. 9-13.
Fed policy makers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing the purchases if the economy improves, minutes of their July meeting showed.
Central bankers had affirmed a pledge on July 31 to continue bond buying until they see signs “the outlook for the labor market has improved substantially.” The Fed has also committed to hold the main interest rate near zero as long as the jobless rate is above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
Job gains and rising home values have shored up Americans’ finances, propelling big-ticket purchases such as automobiles. Cars and light trucks sold in August at the fastest annualized rate since 2007, according to Ward’s Automotive Group. Sales at General Motors Co., Ford, Toyota Motor Corp. and Honda Motor Co. all exceeded analysts’ estimates.
Dearborn, Michigan-based Ford, the second-largest U.S. automaker, this week reported it will boost fourth-quarter production by 7 percent. The company said August that an additional shift of 1,400 new workers at a factory in Flat Rock, Michigan, will help increase its Fusion sedan capacity.
Other businesses adding workers include AT&T, the largest U.S. phone company, which is looking to fill “hundreds” of positions in the San Francisco Bay area, the company said in an Aug. 29 statement.
The payrolls report may also show employment at factories grew by 5,000 in August after a 6,000 gain in July, according to the Bloomberg survey.
The Institute for Supply Management’s factory index showed manufacturing expanded in August at the fastest pace since June 2011. The group’s gauge of service industries, which cover almost 90 percent of the economy, posted the highest reading since December 2005, according to data compiled by Bloomberg.
Some companies contending with limited growth in overseas markets are trimming their workforce. San Jose, California-based Cisco Systems Inc. (CSCO), the biggest maker of networking equipment, on Aug. 14 said it is cutting 4,000 jobs, or 5 percent of its workforce, as weaker sales in Japan, China and Europe weigh on revenue growth.
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