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Employment, Manufacturing Probably Slowed: U.S. Economy Preview

Hiring, Manufacturing Probably Cooled
The jobs report, due on Sept. 3, will show overall payrolls fell 100,000 this month. Photographer: Andrew Harrer/Bloomberg

Hiring and manufacturing probably cooled in August, showing companies are scaling back as the U.S. recovery shows signs of stumbling, economists said before reports this week.

Private payrolls that exclude government agencies rose by 47,000 this month after a 71,000 July gain, while the unemployment rate rose to 9.6 percent, according to the median estimate of 33 economists surveyed by Bloomberg News. Factories expanded at the weakest pace in almost a year, an Institute for Supply Management report is forecast to show.

Federal Reserve Chairman Ben S. Bernanke said last week the central bank will do “all that it can” to sustain an expansion that’s still restrained by weaker-than-anticipated consumer spending and “painfully slow” job growth. Other reports this week may show household purchases are stagnating and service industries, the biggest part of the economy, decelerated.

“We have a lot to worry about for the second half, as this recovery is losing steam,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The job market will remain pretty lackluster. There is no magic fix in terms of policy.”

The jobs report, due from the Labor Department on Sept. 3, will also show overall payrolls fell 100,000 this month, reflecting the dismissal of temporary workers hired by the government to conduct the census, according to the survey median. The unemployment rate probably rose from 9.5 percent.

Manufacturing Cools

The Tempe, Arizona-based ISM’s factory gauge dropped in August to 52.8, the median estimate in the Bloomberg survey. The report is due on Sept. 1 and figures greater than 50 signal expansion.

The projected figure would be the weakest since September 2009, indicating manufacturing, which spearheaded the recovery as customers rebuilt inventories and shipped more goods overseas, may be starting to pull back.

The supply management’s group may report on Sept. 3 that its services index, which covers almost 90 percent of the economy, declined to a six-month low of 53.2 in August from 54.3, according to the survey.

A report from the Commerce Department last week showed orders for non-defense capital goods excluding aircraft, a proxy for future business investment, slumped 8 percent in July.

Intel Corp., the world’s biggest chipmaker, last week cut its third-quarter revenue forecast. Sales are getting hurt by “weaker than expected demand for consumer PCs in mature markets,” Santa Clara, California-based Intel said in a statement, referring to personal computers.

‘Painfully Slow’

“The painfully slow recovery in the labor market has restrained growth in labor income, raised uncertainty about job security and prospects, and damped confidence,” Bernanke said at the Kansas City Fed’s annual monetary symposium in Jackson Hole, Wyoming, on Aug. 27.

The Fed “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” Bernanke said.

Stocks rallied and Treasuries retreated after Bernanke pledged to safeguard the economy. The Standard & Poor’s 500 Index gained 1.7 percent to 1,064.59 at the 4 p.m. close in New York on Aug. 27. The yield on the 10-year Treasury surged to 2.65 percent from 2.48 percent late on the previous day.

Fed Meeting Minutes

The Fed on Aug. 31 will release the minutes of its last meeting, during which policy makers retained their commitment to keep the benchmark interest rate close to zero for an “extended period” and decided to maintain their holdings of securities to stop money from draining out of the financial system.

Cooling growth and a sluggish labor market may also feed voter discontent heading into the November elections that will determine which party controls Congress.

Polls show the public is increasingly skeptical of President Barack Obama’s performance. Public approval for the president’s handling of the economy was at 41 percent in an Aug. 11-16 Associated Press-GfK survey, an all-time low and down from 50 percent last July.

Households are trying to pay off debt and limit purchases after the U.S. lost more than 8 million jobs since the recession began in December 2007. Consumer spending rose in July as auto sales rebounded from the lowest level in four months, a report tomorrow is projected to show.

Consumer Spending

Purchases climbed 0.3 percent after no change the prior month, according to the survey median. The increase in spending probably also reflected the biggest gain in prices in a year, indicating the advance will be almost wiped away when the figures are adjusted for inflation.

The lack of employment is restraining sentiment, raising the risk that household spending, which accounts for about 70 percent of the economy, will falter. The Conference Board’s index of consumer confidence, due on Aug. 31, was little-changed at 50.9 this month after 50.4 in July, according to the median forecast in a Bloomberg survey.

Housing is also retreating. Gains in home prices probably cooled in June, a, Aug. 31 report from S&P/Case-Shiller is projected to show. Two days later, data from the National Association of Realtors may show pending home sales, or the number of contracts to purchase previously owned houses, fell in July for the third consecutive month.

                        Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Pers Inc MOM%             8/30      July      0.0%      0.3%
Pers Spend MOM%           8/30      July      0.0%      0.3%
Case Shiller Monthly YO   8/31      June      4.6%      3.6%
Chicago PM Index          8/31      Aug.      62.3      57.0
Consumer Conf Index       8/31      Aug.      50.4      50.9
ADP Payroll ,000’s        9/1       Aug.       42        17
ISM Manu Index            9/1       Aug.      55.5      52.8
Construct Spending MOM%   9/1       July      0.1%     -0.5%
Initial Claims ,000’s     9/2      28-Aug     473       475
Factory Orders MOM%       9/2       July     -1.2%      0.4%
Pending Homes MOM%        9/2       July     -2.6%     -1.0%
Nonfarm Payrolls ,000’s   9/3       Aug.      -131      -100
Private Payrolls ,000’s   9/3       Aug.       71        47
Manu Payrolls ,000’s      9/3       Aug.       36        10
Unemploy Rate %           9/3       Aug.      9.5%      9.6%
ISM NonManu Index         9/3       Aug.      54.3      53.2

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