Bank of America's Harris Reduces U.S. Economic Growth, Payroll Forecasts
‘Disappointing’ job gains will prevent the U.S. economy from growing as much as previously thought, according to Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York.
The world’s largest economy will expand at an average 2.4 percent annual pace in the last six months of the year, rather the 2.75 percent he had projected, Harris said in an e-mailed note. Harris reduced his estimate for gross domestic product next year to 2.4 percent from 2.6 percent.
Companies added 71,000 workers to payrolls in July, less than the 125,000 Harris estimated, figures from the Labor Department showed last week. The jobless rate held at 9.5 percent as discouraged jobseekers left the labor force.
“The new information is quite disappointing,” Harris wrote. “On the other hand, we see three fundamental reasons for optimism,” he said.
Employers cut staff too deeply during the economic slump, suggesting some “pressure for rehiring,” said Harris. Current economic growth should be generating about 125,000 jobs a month, he said. Finally, increases in hours worked and temporary staffing “confirm that firms are under pressure to increase employment.”
“We are loath to completely capitulate on the job outlook,” wrote Harris.
Payrolls excluding census workers will grow by 87,000 a month on average this year, down from a prior estimate of 130,000, Harris said. Next year, employment will increase by 174,000 a month, rather than by 205,000.