Payrolls Probably Fell, Factories Sped Up: U.S. Economy Preview

Payrolls Probably Fell, Factories Sped Up: U.S. Economy Preview


Nov. 1 (Bloomberg) -- Employers in the U.S. kept cutting jobs in October and manufacturing picked up, pointing to an uneven economic recovery that will take time to encourage hiring, economists said before reports this week.

Payrolls fell by 175,000 workers last month, deepening the worst employment slump since the 1930s, according to the median of 63 estimates in a Bloomberg News survey ahead of a Nov. 6 Labor Department report. A purchasing managers’ report may show factories expanded at the fastest pace since 2006.

Rising joblessness and waning government assistance raise the risk that consumer spending will slip again, holding back the expansion. Federal Reserve policy makers, meeting this week, will probably debate whether the lack of jobs merits maintaining interest rates low for a long time, or if excess stimulus risks kindling inflation.

“No one’s going to hire anybody until they have to, so it’s a very tough environment for households,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “Manufacturing is clearly the strongest part of the economy right now because it’s benefiting from the need to restock.”

The jobless rate last month probably climbed to 9.9 percent, the highest level since 1983, from 9.8 percent in September, according to the survey median. Unemployment will exceed 10 percent early next year, according to the median forecast in a Bloomberg poll last month.

Smaller Declines

The projected drop in employment would be the smallest since August 2008, indicating the labor market is deteriorating at a slower pace. Job losses peaked at 741,000 in January, the biggest one-month plunge since 1949.

Fed policy makers, led by Chairman Ben S. Bernanke, meet Nov. 3-4 in Washington and may repeat their pledge to keep interest rates low for an “extended period.”

The world’s largest economy grew at a 3.5 percent annual pace from July through September, the first quarterly expansion in more than a year, according to Commerce Department figures released last week. A separate government report showed consumer spending, which comprises about 70 percent of the economy, fell in September for the first time in five months.

Manufacturing, which has helped drive the recovery, probably accelerated last month, economists said.

The Tempe, Arizona-based Institute for Supply Management may report tomorrow that its manufacturing index climbed to 53 in October, the highest level since August 2006, the survey median showed. Readings greater than 50 signal expansion.

More Orders

A report from the Commerce Department on Nov. 3 is expected to show that orders placed with U.S. factories rose 0.8 percent in September from the previous month, according to the survey median. A gain would be the fifth in the past six months.

The jobs report on Nov. 6 may also show factory employment dropped by 46,000 workers last month compared with a 51,000 decrease in September. The U.S. has lost a total of 7.2 million jobs since the recession began in December 2007.

Some manufacturers are starting to rehire previously dismissed employees. Cummins Inc., the largest maker of heavy- duty diesel truck engines in North America, cut about 7,500 workers from late 2008 through June and has since recalled about 900.

“Despite the improvements we have seen in some of our markets, we still face considerable challenges over the next year,” Chief Operating Officer Tom Linebarger said Oct. 30 on a conference call. “In particular, we expect the first half of 2010 to be extremely difficult, especially in North America.”

Stockpiles Fall

Inventories at wholesalers in September probably dropped at a slower pace, a Commerce Department report on Nov. 6 is expected to show. The 1 percent decrease, the smallest since January, suggests companies anticipate a pickup in sales and don’t want to deplete stockpiles much more.

The Standard & Poor’s 500 Index fell last week, marking the first monthly drop since February, after reports prompted concern that consumers will restrain the economic recovery.

In other reports this week, the number of contracts to buy previously owned homes were little changed in September, the first time in eight months they didn’t increase, according to the survey median. The National Association of Realtors’ report on pending home sales is due Nov. 2.

Home sales have climbed in recent months, propelled in part by an $8,000 tax credit for first-time buyers that’s set to expire at the end of this month.

Senate Democrats want to extend the credit through April and expand it to allow higher-income Americans and some who already own homes to qualify for the incentive. The White House endorses the extension, and lawmakers are expected to vote on the measure this week, according to Senate Majority Leader Harry Reid.

Spending on construction projects probably fell 0.2 percent in September after a 0.8 percent gain the previous month, according to the survey median ahead of a Commerce Department report on Nov. 2.



Bloomberg Survey

===============================================================
Release Period Prior Median
Indicator Date Value Forecast
===============================================================
ISM Manu Index 11/2 Oct. 52.6 53.0
ISM Prices Index 11/2 Oct. 63.5 64.0
Construct Spending MOM% 11/2 Sept. 0.8% -0.2%
Pending Homes MOM% 11/2 Sept. 6.4% 0.0%
Vehicle Sales Mlns 11/3 Oct. 9.2 9.8
Domestic Vehicles Mlns 11/3 Oct. 6.8 7.3
Factory Orders MOM% 11/3 Sept. -0.8% 0.8%
ADP Payroll ,000’s 11/4 Oct. -254 -200
ISM NonManu Index 11/4 Oct. 50.9 51.6
Productivity QOQ% 11/5 2Q 6.6% 6.5%
Labor Costs QOQ% 11/5 2Q P -5.9% -4.0%
Initial Claims ,000’s 11/5 24-Oct 530 522
Cont. Claims ,000’s 11/5 17-Oct 5797 5750
ICSC Chain Store Sales 11/5 Oct. 0.1% 2.2%
Nonfarm Payrolls ,000’s 11/6 Oct. -263 -175
Unemploy Rate % 11/6 Oct. 9.8% 9.9%
Manu Payrolls ,000’s 11/6 Oct. -51 -46
Hourly Earnings MOM% 11/6 Oct. 0.1% 0.1%
Hourly Earnings YOY% 11/6 Oct. 2.5% 2.2%
Avg Weekly Hours 11/6 Oct. 33.0 33.1
Whlsale Inv. MOM% 11/6 Sept. -1.3% -1.0%
Cons. Credit $ Blns 11/6 Sept. -12.0 -10.3
===============================================================

bloomberg