Employers in the U.S. probably expanded payrolls in April by the most in five months, adding to evidence the world’s largest economy is springing back from a weak start to the year.
The Labor Department’s jobs report concludes a busy week on the U.S. economic calendar. The government’s initial tally of first-quarter gross domestic product on April 30 may show the slowest growth in a year. Federal Reserve policy makers, who on the same day conclude their third meeting of the year, will probably reduce the pace of assets purchases designed to stoke the economy.
Elsewhere, the U.K. economy is gaining momentum -- probably expanding from January through March at the fastest pace in almost four years -- while Brazil is likely to report that the primary budget surplus remained close to a five-month low, and growth in Taiwan was the strongest since 2012.
U.S. LABOR MARKET
-- Payroll growth probably accelerated in April as companies remained upbeat about the economy’s prospects after a setback in demand caused by snowstorms and colder temperatures earlier this year. Employers added 215,000 workers, the most since November, economists project a May 2 report from the Labor Department will show. Last month, companies powered the labor market past a milestone with a 192,000 payroll gain as private employment exceeded the pre-recession peak for the first time. The job gains are pushing down the unemployment rate, which fell to 6.6 percent in April from 6.7 percent, according to the survey median. The jobless rate would match January as the lowest since October 2008.
-- “We expect a generally positive tone from this month’s jobs report,” Jay Feldman, an economist at Credit Suisse in New York wrote in a research note. “While 200,000 would be constructive, it would not be a dramatic departure from the trend, and would likely be viewed as ‘steady as she goes’ from a near-term Fed policy perspective.”
-- “We are forecasting non-farm payrolls at +240k, because the four-week average on initial jobless claims reached a new post-recession low for the employment survey period,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, wrote in a note to clients. “This is a positive sign for the labor market that is also being confirmed by employee tax withholding receipts, which are trending higher, as well.”
-- Fed officials will wind up their two-day policy meeting on April 30 -- and probably with little fanfare. Economists project Fed Chair Janet Yellen and her colleagues will dial back monthly purchases of Treasuries and mortgage-backed securities by $10 billion to $45 billion. Yellen isn’t scheduled to give a press conference after release of a statement by the Federal Open Market Committee.
-- “The Fed will likely give a nod to an economy that is gathering some momentum after a weather-depressed early 2014,” RBC Capital Markets LLC’s fixed income and currency strategy team, including Michael Cloherty in New York, wrote in a research note. “Bottom line: this is likely to be a non-event and we will have to wait until the June 18 meeting/press conference for something more nuanced.”
-- The Fed will take a first-quarter economic slowdown in stride as inclement winter weather weighed on corporate and consumer demand, construction faltered and inventories grew at a slower pace. Figures on April 29 will probably show gross domestic product expanded at a 1.2 percent annualized pace, the weakest in a year, after a 2.6 percent advance from October through December. Consumer spending, which accounts for almost 70 percent of GDP, is projected to rise 1.2 percent, down from a 3.3 percent pace in the fourth quarter.
-- “The cold, snowy weather disrupted economic activity across a broad swathe of the Midwest and eastern seaboard and may have cut 1 percentage point from real Q1 GDP growth,” Michael Carey, chief economist at Credit Agricole in New York, wrote in a research note. “However, we see growth rebounding to 3.5 percent in Q2.”
-- The economy in the U.K. probably grew in the first quarter at the fastest pace since the second quarter of 2010, fueled by Bank of England monetary policy that’s keeping the benchmark interest rate at a record low. Economists forecast a 0.9 percent increase after a 0.7 percent gain in the final three months of 2013, according to the Bloomberg survey median before the Office for National Statistics’ report on April 29.
-- Officials are looking for the recovery to broaden beyond the housing market to other parts of the economy. The independent Office for Budget Responsibility projects investment will grow about 8 percent per year over the next four years. This week’s GDP report will include output estimates for the main areas of the economy, including industrial production and construction.
-- “We expect all sectors of the economy to have contributed to GDP growth in the first quarter,” said Howard Archer, an economist at IHS Global Insight in London. “With the economy having seemingly got off to a robust start to 2014 following its much improved performance in 2013, we now believe it can achieve growth of 3 percent this year.”
-- Brazil’s central bank on April 30 may report that the primary budget surplus, which excludes interest payments, held near a five-month low in March. The Bloomberg survey median for March is 3.1 billion Reais ($1.34 billion) compared with 2.1 billion Reais in February. Brazil’s government is targeting a primary budget surplus of 2 percent to 2.5 percent of gross domestic product next year, up from 1.9 percent this year, according to guidelines for 2015 budget. Since July 2011, the 12-month primary surplus has declined from 3.83 percent of GDP to 1.76 percent in February.
-- “From the information we have, we are expecting a very weak primary surplus,” said Pedro Tuesta, senior Latin America economist at 4Cast Ltd in Washington. The “March numbers will be below the target. Revenue is low because gross domestic product is not growing fast.”
-- “In March there is normally a small surplus. There is an increase in income that is in line with an increase in expenditures,” said Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA in Sao Paulo. “The increase in income comes from income tax collection. Transfers to states and local governments generally fall. There is some seasonality involved.”
-- Taiwan’s economy probably expanded 3.08 percent in the first quarter from a year earlier, the most since the end of 2012, after a 2.95 percent gain in the previous period, a Bloomberg survey showed ahead of figures due April 30.
-- “Improved global demand has modestly lifted production and exports; domestic demand has been resilient, helped by upbeat consumers,” Moody’s Analytics economists including Sydney-based Alaistair Chan wrote in a report. “This may taper early in the second quarter given the political woes over further trade agreements with China.”