Payrolls Probably Fell, Factories Stalled: U.S. Economy Preview

Payrolls Probably Fell, Factories Stalled: U.S. Economy Preview


Aug. 31 (Bloomberg) -- Payrolls in the U.S. probably fell in August for an eighth month and manufacturing stalled, signaling growth faltered, economists said before reports this week.

Employers probably cut 75,000 jobs this month, according to the median estimate in a Bloomberg News survey ahead of a Labor Department report Sept. 5. A private poll in two days may show factory activity stagnated for a second month.

Mounting job losses, sliding home values, reduced access to credit and rising prices have given Americans reason to pull back. Gripped by this vicious circle of firings and spending cuts, the economy may weaken again in coming months.

``The deterioration will be quite noticeable,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``We'll see job cuts continuing as businesses are under a lot of pressure. The manufacturing sector is getting support from exports, but being held back by weak domestic activity.''

The employment report may also show the jobless rate was unchanged this month at a four-year high of 5.7 percent, according to the Bloomberg survey median. Factory payrolls probably fell by 35,000.

Soaring costs and slowing sales are pushing carmakers and airlines to cut staff. UAL Corp.'s United Airlines, the world's second-largest carrier, last week said it'll eliminate 1,550 flight-attendant jobs to help stem losses.

Job Cuts

General Motors Corp., the largest U.S. automaker, is offering early-retirement incentives to about 9,000 U.S. salaried workers, people familiar with the plan said on Aug. 29. Earlier this month, GM Chief Executive Officer Rick Wagoner said he's not yet seeing signs of a recovery in the economy or vehicle sales.

Other industries are also hurting. Marvell Technology Group Ltd., the maker of chips for phones such as the BlackBerry, last week provided sales projections that missed analysts' estimates for this quarter.

``If you look at the housing situation, the debt situation and gas prices, it adds up to something unfavorable,'' Clyde Hosein, chief financial officer of Marvel, which is based in Hamilton, Bermuda, and is run from Santa Clara, California, said in an interview on Aug. 28.

The projected drop in payrolls this month would bring the total decline in employment so far this year to more than half a million. The economy created 1.1 million jobs in 2007.

Employment is among the indicators tracked by the National Bureau of Economic Research, the official arbiter of U.S. economic cycles, in making the recession call. The others are sales, incomes, production and gross domestic product.

Recession Definition

The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.

Consumer spending, which accounts for more than two-thirds of the economy, fell in each of the past two months after adjusting for inflation, reflecting the weakening job market.

Companies are focusing on getting more out of remaining employees to cut expenses as sales slow. Productivity, a measure of worker efficiency, probably grew at a 3.4 percent annual pace in the second quarter, a Sept. 4 report from the Labor Department is forecast to show.

Declining demand is also prompting manufacturers to cut back. The Institute for Supply Management's factory index was probably unchanged at 50 in August for a second month, the survey median shows. A reading of 50 is the dividing line between expansion and contraction. The report is due on Sept. 2.

Commerce Department figures that same day may show spending on construction projects dropped in July for the fifth time in seven months, according to the survey.

BLOOMBERG