Payrolls in U.S. Probably Increased Amid Budget Impasse
Payrolls probably grew in February, showing U.S. employers were looking beyond the budget impasse in Washington as sales improved, economists said before reports this week.
Another 160,000 workers were hired last month after employment rose by 157,000 in January, according to the median forecast of 70 economists surveyed by Bloomberg before a March 8 Labor Department report. The jobless rate held at 7.9 percent, the survey showed.
More hiring is needed to ensure consumer spending, which accounts for about 70 percent of the economy, will withstand the increase in the payroll tax and higher gasoline prices. Federal Reserve policy makers remain unsatisfied with the pace at which the number of out-of-work Americans, currently at 12.3 million, has been whittled down, indicating they’ll keep adding stimulus to spur growth.
“Things are slow and steady,” said Julia Coronado, the New York-based chief economist for North America at BNP Paribas, whose payrolls forecast matched the Bloomberg survey median. “The Fed right now is happy with the stability but unhappy with the lack of upward momentum, so there’s nothing they see that tells them to take their foot off the gas.”
Private payrolls, which don’t include government staff, probably increased by 167,000 last month, after a 166,000 gain in January, economists anticipate.
While the unemployment rate is down 0.4 percentage point in the past year, it hasn’t fallen below 7.8 percent since 2008.
“Consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually,” Fed Chairman Ben S. Bernanke told lawmakers last week during his semiannual testimony on monetary policy. Central bank officials still want to see “substantial improvement in the outlook for the labor” and will thus continue to buy securities and keep interest rates low to stimulate the economy, he said.
Improvements in the labor market this year have so far occurred in the face of fiscal constraints that began at the start of 2013. Congress on Jan. 1 let the payroll tax that funds Social Security revert to 6.2 percent from 4.2 percent, and boosted the levy on top income earners.
While economists’ projections show the tax increases weren’t enough to derail hiring last month, the economy will be tested this year by $85 billion in across-the-board budget cuts, known as sequestration, that began last week because Congress couldn’t compromise on deficit reduction.
Some companies are taking the budget battle in stride. Accounting firm Deloitte LLP plans to increase its staff by 18,000 this year, according to Chief Executive Officer Joe Echevarria. Deloitte is hiring, even amid the political uncertainty from Washington, to support long-term growth, he said during a Feb. 27 interview on “Bloomberg Surveillance.”
“The private sector is the biggest hirer of people in this country, not the federal government,” Echevarria said. “So while its spending declines, the private sector can more than step in if they’re incented to hire and grow.”
Investment from firms like Deloitte suggests the service industry, the largest part of the world’s biggest economy, is seeing steady demand even as tax increases and spending cuts threaten to sap consumers of jobs and spending power. A healthier housing market is also feeding businesses outside of manufacturing.
A report on March 5 will show the Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers almost 90 percent of the economy, kept growing last month, according to the Bloomberg median estimate. The index was little changed at 55 in February after 55.2 the prior month. Readings greater than 50 signal expansion.
Markets have also looked past the impending government spending cuts. The Standard & Poor’s 500 Index climbed 6.5 percent this year, better than the 4.1 percent gain for the MSCI All Country World Index. (MXWD) The U.S. Dollar Index, which tracks the currency against six of America’s biggest trading partners, was the highest since August.
Bloomberg Survey =============================================================== Release Period Prior Median Indicator Date Value Forecast =============================================================== ISM NonManu Index 3/5 Feb. 55.2 55.0 Factory Orders MOM% 3/6 Jan. 1.8% -2.2% Trade Balance $ Blns 3/7 Jan. -38.5 -43.0 Initial Claims ,000’s 3/7 2-Mar 344 355 Nonfarm Payrolls ,000’s 3/8 Feb. 157 160 Private Payrolls ,000’s 3/8 Feb. 166 167 Unemploy Rate % 3/8 Feb. 7.9% 7.9% ===============================================================
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