Slower Job Growth Seen as Banks Tighten Credit: Chart of the Day

Companies are poised to create jobs more slowly later this year because bankers have become less inclined to lend them money, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

The CHART OF THE DAY shows how Levkovich drew this conclusion: by looking at the percentage of banks that are tightening credit to larger companies. The figures come from a quarterly survey of senior loan officers by the Federal Reserve.

Banks that made loans harder to get during last year’s fourth quarter exceeded those easing credit by 5.4 percentage points, according to survey results released last week. It was the first time in nine quarters that U.S. lenders leaned toward stricter criteria.

Changes in lending standards precede shifts in job creation by about three quarters, Levkovich wrote in a Feb. 3 report. The New York-based strategist determined the time lag by comparing the survey data to year-over-year percentage changes in the number of employees other than farm workers.

“Investors should expect a significant slowing of job growth in the months ahead,” he wrote. Last month, the U.S. economy added 243,000 jobs. The increase was the biggest since April and helped reduce the unemployment rate to 8.3 percent, the lowest since February 2009.

Capital spending may suffer as well, he added, because credit tends to tighten three quarters before the expenditures slump. Businesses have increased outlays for eight consecutive quarters, according to data compiled by the Commerce Department and cited in the report.

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