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Payroll Gains in U.S. Probably Sustained as Confidence Improved

A job seeker waits to interview with company representatives at the Hire Live Job Fair in El Segundo, California. Photographer: Patrick T. Fallon/Bloomberg
A job seeker waits to interview with company representatives at the Hire Live Job Fair in El Segundo, California. Photographer: Patrick T. Fallon/Bloomberg

July 5 (Bloomberg) -- Employers probably increased staff in June at almost the same pace as in the prior month amid growing confidence the U.S. economy will overcome fiscal and global headwinds.

Payrolls grew by 165,000 workers after rising by 175,000 in May, according to the median forecast of 87 economists in a Bloomberg survey. The report may also show the unemployment rate fell to 7.5 percent, matching April’s four-year low, from May’s 7.6 percent, according to the survey.

Job gains and a rebound in housing are shoring up Americans’ finances and boosting expectations that the economy will gain momentum even after the payroll tax increased and government agencies began to cut spending. Federal Reserve policy makers have said they’ll start to trim bond purchases before the end of the year as unemployment falls.

“The job market is one of the brighter parts of the economy,” said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York. “We’ve been surprised at how strong payrolls have been in relation to the overall economy.”

The Labor Department is scheduled to release the data at 8:30 a.m. in New York. Estimates for the change in payrolls in the Bloomberg survey ranged from gains of 77,000 to 220,000.

Other measures of the labor market have pointed to gains even as widespread economic progress remains elusive.

Service Industries

Service providers hired more workers last month even after placing orders at a slower pace, the Institute for Supply Management reported this week. A measure of hiring climbed to a four-month high last month, while the overall gauge dropped to its lowest reading since February 2010.

That report contrasted with an ISM reading two days earlier that showed a measure of factory employment dropped in June to its lowest since September 2009.

Figures from ADP Research Institute in Roseland, New Jersey, showed private employers added 188,000 workers last month following a 134,000 gain in May.

Automakers are among standouts in the recovery, enjoying gains in sales fueled by improved confidence and cheap credit. New cars and trucks sold in June at the fastest pace since 2007 as American drivers replaced aging vehicles and a rebound in housing construction moved trucks off dealer lots.

The industry sales rate surged to a 15.9 million annualized pace, exceeding the 15.5 million median estimate of economists surveyed by Bloomberg and benefiting companies such as Ford Motor Co. and General Motors Co. That’s the best monthly pace since 16.1 million in November 2007 and compares to 14.3 million a year earlier, according to data from Ward’s Automotive Group.

Auto Sales

Toyota Motor Corp., the world’s largest carmaker, raised deliveries 9.8 percent last month from the same time last year, topping a projected 6.2 percent gain. It was the company’s best June performance in six years, said Bill Fay, group vice president of U.S. Toyota sales.

“Economic fundamentals remain very strong,” Fay said on a July 2 earnings call. “There really doesn’t appear to be a let up in pent-up demand.”

Household purchases, which account for about 70 percent of the economy, rebounded in May, recovering from a decline in April, as incomes advanced 0.5 percent, according to figures from the Commerce Department. New-home sales reached an almost five-year high in May, the Commerce Department reported last week.

The recovery continues to struggle against crosscurrents. Americans are feeling the effects of a two percentage-point increase in the payroll tax that took effect in January and growth is being buffeted by weakness overseas and federal spending cuts that began in March.

Bernanke’s Announcement

Financial markets also remain fragile after Fed Chairman Ben S. Bernanke said the central bank could start reducing its $85 billion in monthly bond purchases later this year and end the program in mid-2014. Bernanke said last month he expects the jobless rate to be around 7 percent when the Fed stops buying bonds.

From June 18, the day before Bernanke’s announcement, to June 24, the Standard & Poor’s 500 Index dropped 4.8 percent. It has since regained some of that lost ground, 2.7 percent to close at 1,615.41 July 3. The markets were closed yesterday for the U.S. independence celebration.

                        Bloomberg Survey

================================================================
                           Nonfarm  Private     Manu Unemploy
                          Payrolls Payrolls Payrolls     Rate
                            ,000’s   ,000’s   ,000’s        %
================================================================

Date of Release              07/05    07/05    07/05    07/05
Observation Period            June     June     June     June
----------------------------------------------------------------
Median                         165      175        0     7.5%
Average                        165      171       -1     7.5%
High Forecast                  220      200        8     7.7%
Low Forecast                    77       85      -12     7.4%
Number of Participants          87       44       25       82
Previous                       175      178       -8     7.6%
----------------------------------------------------------------
4CAST                          145      160     ---      7.5%
ABN Amro                       190      175     ---      7.6%
Action Economics               165      175        0     7.5%
Ameriprise Financial           170      178       -2     7.5%
Banca Aletti                   155      188        4     7.6%
Bank of the West               165     ---        -2     7.5%
Bank of Tokyo-Mitsubishi       165     ---      ---      7.5%
Banorte-IXE                    174     ---      ---      7.6%
Bantleon Bank AG               155     ---      ---      7.5%
Barclays                       150      160     ---      7.5%
Bayerische Landesbank          160     ---      ---      7.5%
BBVA                           165      176       -1     7.7%
BMO Capital Markets            155     ---      ---      7.6%
BNP Paribas                    175     ---      ---      7.6%
BofA Merrill Lynch             165      175     ---      7.5%
Capital Economics              150     ---      ---      7.6%
CIBC World Markets             150     ---      ---      7.5%
Citi                           160     ---      ---      7.4%
ClearView Economics            170      175        0     7.6%
Comerica                       170     ---        -5     7.5%
Commerzbank AG                 175      180     ---      7.5%
Credit Agricole CIB            150     ---      ---      7.5%
Credit Suisse                  150      160     ---      7.5%
CTI Capital                    181     ---      ---      ---
Daiwa Securities America       175     ---      ---      7.6%
DekaBank                       180     ---      ---      7.5%
Desjardins Group               200     ---      ---      7.6%
Deutsche Bank Securities       145      155     ---      7.5%
Deutsche Postbank AG           160     ---      ---      7.5%
DZ Bank                        180     ---      ---      7.5%
First Trust Advisors           175      180        0     7.6%
FTN Financial                  165     ---      ---      7.5%
Goldman, Sachs & Co.           150     ---      ---      7.5%
Hammer Partners                170     ---      ---      7.5%
Helaba                         150     ---      ---      7.5%
High Frequency Economics       175     ---      ---      7.5%
HSBC Markets                   155      161        1     7.6%
Hugh Johnson Advisors          175      175        0     7.6%
IDEAglobal                     160      170        5     7.5%
IHS Global Insight             152     ---      ---      7.5%
Informa Global Markets         185     ---         7     7.6%
Intesa Sanpaolo                165     ---      ---      7.5%
J.P. Morgan Chase              150      160       -5     7.5%
Janney Montgomery Scott        167      177        0     7.6%
Jefferies                      150      160        0     7.5%
Landesbank Berlin              125     ---      ---      7.5%
Landesbank BW                  220     ---      ---      7.5%
Lloyds Tsb Bank                185      196        0     7.5%
Maria Fiorini Ramirez          170      180     ---      ---
Market Securities              180     ---      ---      7.5%
MET Capital Advisors           164      120     ---      7.5%
Mizuho Securities              175     ---      ---      7.7%
Moody’s Analytics              150      150      -10     7.6%
Morgan Stanley                 180      192       -3     7.5%
National Bank Financial        140     ---      ---      7.6%
Natixis                        160     ---      ---      7.5%
Nomura Securities              155      160        8     7.6%
Nord/LB                        160     ---         0     7.5%
OSK Group/DMG                  150     ---      ---      7.5%
Oxford Economics               175     ---      ---      7.6%
Pantheon Macroeconomics        125     ---      ---      7.6%
Pierpont Securities            160      180     ---      7.5%
PineBridge Investments         175     ---      ---      7.6%
PNC Bank                       160      165        3     7.5%
Prestige Economics             185     ---      ---      7.5%
Raiffeisenbank International   175      180     ---      7.5%
Raymond James                  170      180     ---      7.5%
RBC Capital Markets            170      180     ---      7.5%
RBS Securities                 160      170     ---      7.5%
Regions Financial              182      188       -2     7.5%
Renaissance Macro Research     190      200     ---      7.5%
Santander                      170      175     ---      7.6%
Scotiabank                     165     ---      ---      7.6%
SMBC Nikko Securities          200      200     ---      7.5%
Societe Generale               175      190     ---      7.4%
Southbay Research              142      147     ---      ---
Southern Polytechnic State      77       85     ---      7.6%
Standard Chartered Bank        155      165     ---      7.5%
Stone & McCarthy               170      175        5     7.4%
TD Securities                  161      176      -12     7.5%
TrimTabs                       182     ---      ---      ---
UBS                            150      155     ---      7.5%
UniCredit Research             180     ---      ---      ---
University of Maryland         167      175       -5     7.6%
Wells Fargo & Co.              185     ---      ---      7.6%
Westpac Banking Co.            145     ---      ---      7.5%
Wrightson ICAP                 190      180     ---      7.5%
================================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

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