U.S. Payroll Growth Probably Accelerated From Four-Year Low

U.S. Payroll Growth Probably Accelerated From Four-Year Low

Feb. 1 (Bloomberg) -- Growth in U.S. payrolls probably accelerated in January from the weakest pace in more than four years, while remaining at a level that indicates a softening job market, economists said before a report today.

Payrolls rose by 70,000 following an increase of 18,000 in December that was the smallest since August 2003, according to the median forecast of 80 economists surveyed by Bloomberg News.

The unemployment rate probably held at 5 percent, the highest in two years, underscoring concern that consumer spending will keep slowing at a time when households are already being hurt by falling home values and stock prices. Investors are betting the Federal Reserve will keep lowering rates to stimulate growth.

``The picture starting to emerge, at the very least, is a very severe slowing in the overall economy, with the labor market deteriorating,'' Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, said in a Bloomberg Television interview.

Payroll forecasts ranged from gains of 5,000 to 160,000. The Labor Department report is due at 8:30 a.m. in Washington. Job growth in the last quarter of 2007 averaged 97,000 a month, down from 134,000 for the first half of the year and 189,000 a month in 2006.

A report from the Tempe, Arizona-based Institute for Supply Management, due at 10 a.m., will show manufacturing shrank in January at the fastest pace in more than four years. The purchasers' index fell to 47.3 from 48.4 in December, according to the survey median. Readings lower than 50 signal contraction.

Recession Signals

A bigger-than-forecast December decline in the factory gauge and a 0.3 percentage-point gain in the unemployment rate signaled the economy had entered, or was about to slip into, a recession, according to economists such as Jan Hatzius, chief U.S. economist at Goldman Sachs Group.

Falling stock prices and tighter credit conditions worldwide prompted the Fed on Jan. 22 to lower the benchmark rate by three-quarters of a point in an emergency move, its biggest in two decades.

Policy makers followed that up two days ago with a half- point cut to 3 percent, citing ``softening in labor markets.''

``Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,'' the Fed also said.

The deepest housing recession in a quarter century has weakened demand for building materials and appliances and prompted firings at construction, mortgage-finance and other housing-related industries.

Firings

Home Depot Inc., the world's largest home-improvement retailer, yesterday said it fired 500 workers at its Atlanta headquarters, or about 10 percent of the staff there, to focus resources on its stores, a spokesman said.

``We're operating in a tough business environment, and we expect that to continue into 2008,'' spokesman Ron DeFeo said in an interview.

Lower property values have made Americans feel less wealthy and have limited the amount of home equity available for spending.

Growth in the fourth quarter slowed to a 0.6 percent annual pace, compared with a 4.9 percent rate the previous three months, the government said this week. Consumer spending slowed to a 2 percent pace in the last three months of 2007 from a 2.8 percent rate in the third quarter.

The government will also issue revisions to the payrolls figures in today's report. The Labor Department estimated in October that payrolls for the 12 months ended in March 2007 will probably be reduced by 297,000, the biggest downward revision since 2002.

Revisions Due

Data as far back as January 1990 will also be updated as the government implements a new job-classification system.

Other employment indicators have sent conflicting signals in recent weeks. First-time claims for jobless benefits jumped last week to a 27-month high after falling to a four-month low.

A report from ADP employer Services on Jan. 30 showed private companies added 130,000 workers in January, up from 40,000 in December.

Following the ADP report, Hatzius raised his forecast for January payrolls to 125,000. ``While firmer than we first thought,'' he wrote in a note to clients, the gain doesn't alter the view ``that the labor market is in a longer-term trend of deterioration.''

BLOOMBERG