Jobless Rate Probably Climbed in October Amid Lax Hiring
The jobless rate probably rose in October as U.S. employers kept a tight rein on payrolls with the nation closing in on the so-called fiscal cliff, economists said before a report this week.
A net 125,000 workers were added to headcounts following an increase of 114,000 in September, according to the median forecast of 72 economists surveyed by Bloomberg before the Nov. 2 Labor Department figures. The unemployment rate climbed to 7.9 percent last month from a three-year low of 7.8 percent, the survey showed.
“We’re just treading water, getting the labor market to grow fast enough to cover population growth,” said Joshua Dennerlein, a U.S. economist at Bank of America Corp. in New York. The “drop in unemployment was probably not sustainable.”
Hiring may stay restrained as concern mounts that an economy growing at a 2 percent pace is not strong enough to weather the tax increases and spending cuts slated to take effect if lawmakers fail to act by year’s end. Coming just days before the election, the report may also help sway voters still trying to decide between giving President Barack Obama another four years and changing course with Republican challenger Mitt Romney.
Prior to September, joblessness had exceeded 8 percent for 43 months, the longest such stretch since at least 1948. At 7.8 percent, unemployment last month matched the rate at the time Obama took office in January 2009.
Ronald Reagan is the only president to have been re-elected since World War II with unemployment above 6 percent. On Election Day 1984, the rate was at 7.2 percent, having dropped almost three percentage points in the previous 18 months.
At the end of last week, Romney was leading in daily tracking polls of likely voters. He was ahead in an Oct. 21-24 ABC News/Washington Post survey, 50 percent to 47 percent, within the poll’s margin of error of plus or minus 3 percentage points, and by the same advantage in an Oct. 18-24 Gallup poll, with a margin of error of plus or minus 2 percentage points.
While the pace of job creation has slowed relative to the first half of the year, consumers are still managing to spend. The economy expanded at a 2 percent annual rate in the third quarter, more than forecast and boosted by household purchases, Commerce Department figures showed last week.
A report tomorrow may show consumers ended the quarter on a strong note. Household spending increased 0.6 percent in September, the biggest gain in seven months, according to the median estimate in a Bloomberg survey.
The Conference Board’s consumer sentiment index may have risen to 73, the highest level in four years, economists also project ahead of Oct. 30 figures.
At the same time, companies are cutting back in the face of the fiscal cliff, more than $600 billion in tax increases and spending cuts that will take place in place in 2013 unless Congress can reach a budget compromise. Spending on equipment and software was unchanged in the third quarter, the weakest reading in three years, a report showed on Oct. 26.
Shares of retailers and manufacturers reflect this split. The Standard & Poor’s Supercomposite Retailing Index has climbed 22.2 percent so far this year, outpacing a 7.7 percent gain in the S&P’s Industrial Machinery Index over the same period.
A Nov. 1 report may affirm manufacturing is slowing. Economists forecast the Institute for Supply Management’s factory index for October fell to 51.2 from 51.5 the prior month. A reading of 50 is the dividing line between expansion and contraction.
Dow Chemical Co. (DOW), the largest U.S. chemical maker by sales, said last week it will cut about 2,400 jobs and shut 20 manufacturing plants to reduce annual costs by $500 million in the face of slackening global sales.
“We are operating in a slow-growth environment in the near-term,” Andrew Liveris, chief executive officer of Midland, Michigan-based Dow said in a statement. “While these actions are difficult, they demonstrate our resolve to tightly manage operations -- particularly in Europe -- and mitigate the impact of current market dynamics.”
The October jobs readings will probably keep Federal Reserve policy makers focused on trying to speed the economic expansion. They pledged to keep buying $40 billion in mortgage- backed securities a month until the outlook for labor-market conditions improves “substantially,” according a statement issued after they met last week.
“The next payroll report is not going to change the Fed’s view that they need to keep purchasing assets to jumpstart the recovery,” said Bank of America’s Dennerlein.
Bloomberg Survey ============================================================== Release Period Prior Median Indicator Date Value Forecast ============================================================== Pers Inc MOM% 10/29 Sept. 0.1% 0.4% Pers Spend MOM% 10/29 Sept. 0.5% 0.6% Case Shiller Monthly MO 10/30 Aug. 0.4% 0.5% Case Shiller Monthly YO 10/30 Aug. 1.2% 1.9% Consumer Conf Index 10/30 Oct. 70.3 73.0 ADP Payroll ,000’s 11/1 Oct. 162 135 ISM Manu Index 11/1 Oct. 51.5 51.2 Construct Spending MOM% 11/1 Sept. -0.6% 0.7% Nonfarm Payrolls ,000’s 11/2 Oct. 114 125 Private Payrolls ,000’s 11/2 Oct. 104 125 Manu Payrolls ,000’s 11/2 Oct. -16 -2 Unemploy Rate % 11/2 Oct. 7.8% 7.9% Hourly Earnings MOM% 11/2 Oct. 0.3% 0.2% ============================================================
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