Payrolls Probably Declined at Slower Pace: U.S. Economy Preview

Payrolls Probably Declined at Slower Pace: U.S. Economy Preview


Sept. 27 (Bloomberg) -- Employers probably cut fewer jobs in September and manufacturing expanded for a second month as the U.S. embarked on a tenuous recovery, economists said before reports this week.

Payrolls fell by 180,000 workers, the smallest drop in a year, according to the median of 58 estimates in a Bloomberg News survey ahead of an Oct. 2 Labor Department report. Figures from a private group of purchasing managers may show factories advanced at the fastest pace in more than three years.

The mixed figures explain why Federal Reserve policy makers last week said they will keep interest rates low for the foreseeable future. Another report may show household purchases jumped last month by the most in six years as the now-expired government’s “cash-for- clunkers” plan helped prop up consumers shaken by rising joblessness and stagnant wages.

“The initial stages of the recovery will be gradual and uneven,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “The labor market holds the key. We need to see further moderation in payroll declines or risk unwinding the improvement in consumer spending.”

The jobless rate this month probably climbed to 9.8 percent, the highest level since 1983, from 9.7 percent in August, according to economists surveyed by Bloomberg. Unemployment will reach 10 percent by the last quarter of 2009, a Bloomberg poll this month showed.

Job Losses

Payroll losses peaked at 741,000 in January, the most for a single month since 1949. The U.S. has lost 6.9 million jobs since the recession began in December 2007.

While acknowledging that “economic activity has picked up,” the Fed last week said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”

The Standard & Poor’s 500 Index fell 2.2 percent last week, the biggest weekly drop since early July, as figures on home sales and business spending came in weaker than analysts anticipated.

Economists surveyed by Bloomberg this month forecast the economy will grow at a 2.5 percent pace in the second half of the year after shrinking 3.9 percent in the 12 months to June, the biggest slump since quarterly records began in 1947.

Revised figures from the Commerce Department on Sept. 30 may show the economy contracted at a 1.2 percent annual rate in the second quarter, more than the 1 percent pace previously estimated.

Automaker Payrolls

Companies such as auto-parts maker Tenneco Inc. continue to eliminate jobs to cut costs and boost profits amid weak sales. Carmakers, which are trying to rebuild depleted dealer inventories, are calling staff back to work.

General Motors Co., which came out of bankruptcy in July, will add a third shift at plants in Kansas, Indiana and Michigan after “cash-for-clunkers” boosted sales. The plants are taking on additional production from factories slated to close or be idled. The changes will restore 2,400 jobs, the Detroit-based company said last week.

Nonetheless, Tim Lee, the company’s vice president of global manufacturing, said on a conference call Sept. 22, “even with these actions, we will have some employees left on layoff.”

The Obama administration’s $3 billion auto incentive to trade in gas-guzzlers for more fuel-efficient vehicles ran out of funds in late August.

Auto Incentives

Consumer spending probably climbed 1.1 percent in August from the prior month, the most since August 2003, partly reflecting the surge in car sales, economists forecast a Commerce Department report Oct. 1 will show. Incomes, on the other hand, likely grew just 0.1 percent, reflecting the job losses, according to the survey median.

The Tempe, Arizona-based Institute for Supply Management may report Oct. 1 that its manufacturing index climbed to 54 in September, the highest level since April 2006, the survey showed. Readings greater than 50 signal expansion.

Orders placed at factories likely rose 0.5 percent in August after a 1.3 percent gain the prior month, economists projected an Oct. 2 Commerce Department report will show.

The jobs report may also show factory employment dropped by 53,000 workers this month compared with a 63,000 decrease in August.

In other reports this week, the number of contracts to buy previously owned homes rose in August for a seventh consecutive time, according to the survey median. The National Association of Realtors’ report on pending home sales is due Oct. 1.

The S&P/Case-Shiller index of home prices, due Sept. 29, may show declines in property values slowed in July.

Consumer confidence probably rose in September to the highest level in a year, figures from the Conference Board may show the same day, according to economists surveyed.

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