Top Forecaster Brown Sees U.S. Adding 2 Million Jobs in 2011
The U.S. economy will create 2 million jobs in 2011, twice as many as last year, said Scott Brown, the most accurate forecaster of the jobless rate over the past two years according to Bloomberg News calculations.
Unemployment will end the year at 8.6 percent, projected Brown, chief economist at Raymond James & Associates Inc., less than the 8.8 percent median forecast of 61 economists surveyed by Bloomberg from Feb. 2 to Feb. 8. It dropped to 9 percent in January from 9.4 percent the prior month.
President Barack Obama’s deal with congressional Republicans to reduce the payroll tax and extend Bush-era cuts will put more money in Americans’ pockets and spur demand, said Brown. The need to rebuild inventories as sales climb will give the world’s largest economy an added lift this year, he said.
Economists in this month’s survey projected gross domestic product will grow 3.2 percent in 2011, the most in seven years, according to the survey median. That was up from 3.1 percent in the January survey. Brown forecasts growth this year of 3.3 percent accelerating to 3.4 percent in 2012.
Brown arrives at his unemployment forecasts by mining data on jobless claims, firing plans, small business sentiment and purchasing manager surveys. For his longer-term outlook on economic growth, he often writes up lists of positives and negatives, weighing how they may play out.
Brown forecasts the economy will create about 167,000 jobs a month on average this year. The total gain, while more than double last year’s 909,000, shows the U.S. is still years away from recovering the 8.75 million lost in the recession.
Some companies are focusing on adding hourly staff to boost sales, while reducing higher-paid management positions.
Lowe’s Cos., the second-biggest U.S. home-improvement retailer, plans to add 8,000 to 10,000 weekend sales positions to improve staffing at the busiest time of the week. The Mooresville, North Carolina-based chain also will cut 1,700 middle-management jobs as profit growth trails that of larger rival Home Depot Inc.
The Standard & Poor’s 500 Consumer Discretionary Index, which includes retailers like Lowe’s and J.C. Penney Co., has climbed 34 percent since June 30, exceeding the 29 percent gain in the broader 500 Index.
Walt Disney Co., the world’s biggest theme-park company, yesterday reported first-quarter profit that beat analysts’ estimates as the recovering economy drove attendance gains at its theme parks and advertising growth at cable networks led by ESPN.
A Labor Department report last week showed payrolls rose by a fewer-than-forecast 36,000 in January, depressed in part by winter storms. “Growth is improving but it’s not enough to generate a lot of jobs,” said Brown.
That forecast is in sync with the view of Federal Reserve Chairman Ben S. Bernanke.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Bernanke said in a speech in Washington last week. “With employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level.”
Brown’s peers this month were less optimistic on the outlook for household purchases. Consumer spending will average 3.2 percent this year, the biggest gain since 2005, according to the median estimate of economists. Brown sees consumer spending rising 3.7 percent in the current quarter and advancing 3.4 percent for all of 2011.
Zach Pandl, an economist at Nomura Securities International Inc. in New York, is among those who agree spending will get off to a strong start this year. “Better job-market conditions, improving confidence and the payroll tax cut are supporting spending in the first quarter,” said Pandl.
Bank of America Merrill Lynch Global Research sees the consumer lagging behind the broader recovery, with inventory rebuilding a major contributor to growth early in 2011 and continued support from business investment.
“Income growth is weak and income is the single most important feed into consumption,” Neil Dutta, an economist at Bank of America Merrill Lynch in New York.
Brown agrees hurdles remain for the expansion. He is “watching housing prices closely” because further declines will undermine confidence and consumer spending. Strains in state and local government budgets will also lead to spending cuts and job losses, weighing on the recovery, he said.
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