Payrolls Probably Declined in February: U.S. Economy Preview
Feb. 28 (Bloomberg) -- Companies in the U.S. probably cut more jobs in February and the unemployment rate increased, indicating the labor market in the world’s largest economy is still struggling to rebound, economists said before a government report this week.
Payrolls probably fell by 50,000 after declining 20,000 in January, according to the median forecast of 62 economists surveyed by Bloomberg News before the Labor Department’s March 5 report. The unemployment rate may have increased to 9.8 percent from 9.7 percent. Winter storms this month may have contributed to a lower payrolls number, some economists said.
A lack of job growth since the economy began expanding again in mid-2009 is making for an uneven recovery from the worst recession since the 1930s. Companies are reducing head count to trim costs, a trend that’s likely to restrain consumer spending in coming months.
“Even leaving aside the effects of inclement weather, the economy still appears to be shedding jobs,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Although businesses have stopped cutting inventories and are beginning to invest more, they have been more hesitant to increase their hiring.”
Job growth, and the wage gains that accompany it, are needed to further fuel consumer purchases, which account for about 70 percent of the economy.
After the creation of 64,000 jobs in November, the first monthly increase in almost two years, payrolls fell in December and January. The economy has lost 8.4 million jobs since the recession began in December 2007, the most of any downturn in the postwar era.
Bernanke on Employment
Federal Reserve Chairman Ben S. Bernanke told Congress last week that there were “tentative” signs of stabilization in labor markets, such as fewer job losses and a gain in factory employment last month.
“Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce,” Bernanke said. The economy is in a “nascent” recovery that he said will require low interest rates.
U.S. stocks have declined this year, due in part to signs the economy is struggling to accelerate. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average are both down 1 percent so far this year.
The jobless rate probably increased for the first time since October, the survey median showed. The rate is forecast to end the year at 9.5 percent, according to the median estimate of economists surveyed this month.
East Coast Snowstorms
Snowstorms that crippled portions of the East Coast earlier this month may cause the February payroll numbers to look worse than they otherwise would be, some economists said. The job losses associated with the blizzards may result in a bigger gain in March payrolls, they said.
“The weather will certainly play a role,” said Raymond Stone, managing director and an economist at Stone & McCarthy Research Associates in Skillman, New Jersey, who projects payrolls will be reduced by as many as 200,000 because of the storms. His overall forecast is for a decline of 150,000 and he referenced a snow-related payroll drop in January 1996.
Factories are at the forefront of the economic recovery, and orders for manufactured goods are forecast to increase in January for a fifth straight month, according to the median estimate of economists surveyed. The 1.8 percent gain in factory orders, projected before a March 4 report from the Commerce Department, would follow a 1 percent rise in December.
Manufacturing Growth
Manufacturing probably expanded in February for a seventh straight month, economists said before a report from the Institute for Supply Management tomorrow. The Tempe, Arizona- based group’s factory index slowed to 58 from a January reading of 58.4 that was the highest since August 2004, the survey showed. Index readings greater than 50 signal expansion.
The U.S. economy expanded in the fourth quarter at a 5.9 percent annual rate, led by business spending on equipment and software, figures from the Commerce Department last week showed. Consumer spending slowed to a 1.7 percent pace, from 2.8 percent during the previous three months.
At the start of 2010, Americans probably increased their spending by 0.4 percent, from 0.2 percent in December, economists said before a report tomorrow from the Commerce Department. Incomes probably rose 0.4 percent in January for a second month, the survey showed.
Store Closings
The pace of spending is causing some companies to reduce payrolls. Sears Holding Corp., the largest U.S. department-store chain, said this month that it will close 21 underperforming stores in April and May. The closings will affect about 1,000 full-time and part-time workers, Kimberly Freely, a spokeswoman for the Hoffman Estates, Illinois-based company, said in a Feb. 22 telephone interview.
Construction also remains a weak spot for the economy. The Commerce Department tomorrow is expected to report construction spending declined in January for the eighth time in nine months, according to the survey median. The projected 0.6 percent drop would follow a 1.2 percent decrease.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Pers Inc MOM% 3/1 Jan. 0.4% 0.4%
Pers Spend MOM% 3/1 Jan. 0.2% 0.4%
Core PCE Prices YOY% 3/1 Jan. 1.5% 1.4%
ISM Manu Index 3/1 Feb. 58.4 58.0
Construct Spending MOM% 3/1 Jan. -1.2% -0.6%
ADP Payroll ,000’s 3/3 Feb. -22 -10
ISM NonManu Index 3/3 Feb. 50.5 51.0
Productivity QOQ% 3/4 4Q 6.2% 6.3%
Labor Costs QOQ% 3/4 4Q F -4.4% -4.4%
Initial Claims ,000’s 3/4 20-Feb 496 465
Factory Orders MOM% 3/4 Jan. 1.0% 1.8%
Pending Homes MOM% 3/4 Jan. 1.0% 1.0%
Nonfarm Payrolls ,000’s 3/5 Feb. -20 -50
Unemploy Rate % 3/5 Feb. 9.7% 9.8%
Manu Payrolls ,000’s 3/5 Feb. 11 -20
Hourly Earnings MOM% 3/5 Feb. 0.3% 0.2%
Avg Weekly Hours 3/5 Feb. 33.3 33.7
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source: bloomberg
