Unemployment probably climbed inJuly, raising the risk American households will keep a lid onspending for the rest of the year, economists said before agovernment report this week.
The jobless rate rose to 9.6 percent last month from 9.5percent in June, according to the median estimate of 57economists surveyed by Bloomberg News ahead of a LaborDepartment report Aug. 6. A drop in federal census workers asthe population count wound down depressed payrolls by 60,000,the data may also show.
Both manufacturing, which led the U.S. out of therecession, and service industries kept cooling last month,indicating the economic recovery waned at the start of thesecond half, other reports this week may show. Federal ReserveChairman Ben S. Bernanke last month said joblessness is “themost important” problem facing the economy.
“The poor job picture is the Achilles heel of theeconomy,” said Sung Won Sohn, a professor of economics andfinance at California State University-Channel Islands inCamarillo, California. “Reflecting the lackluster job market,consumers have become more cautious about spending.”
The Census Bureau said it let go about 144,000 of thepeople conducting the decennial population count from mid-Juneto mid-July. It still had about 200,000 temporary workers onstaff as of July 17, indicating additional cuts to come thatwill keep distorting the payroll figures for months.
Private Employment
For that reason, economists say private employment, whichexcludes government jobs, will be a better gauge of the state ofthe labor market for much of 2010. Employment at companies roseby 90,000 after an 83,000 gain in June, according to the medianforecast.
“We are getting job gains, but they just don’t feel goodenough,” said Jonathan Basile, an economist at Credit Suisse inNew York.
Joblessness, which reached a 26-year high of 10.1 percentin October, will take time to recede as the number of previouslydiscouraged jobseekers returning to the labor force exceeds thenumber of available jobs.
Factory payrolls increased in July for the seventh straightmonth, according to the survey. Health and education fields havealso been adding workers.
Household spending rose 0.1 percent in June following a 0.2percent gain the previous month, economists project a reportfrom the Commerce Department Aug. 3 will show. Incomes likelyincreased 0.2 percent after climbing 0.4 percent.
‘Focused on Saving’
“Consumers seem to be focused on saving and spending onlyon necessities, and that’s likely to continue through the restof the year,” said Ryan Sweet, a senior economist at Moody’sEconomy.com Inc. in West Chester, Pennsylvania.
Tomorrow, the Institute for Supply Management’smanufacturing index will show factories expanded in July, albeitat a slower pace for a third straight month, according toeconomists surveyed.
The rebound has boosted manufacturers’ shares. The Standard& Poor’s Supercomposite Industrial Machinery Index of 52companies, including Caterpillar Inc. and Deere & Co., hasincreased 14.5 percent so far this year compared with a 1.2percent decline in the broader S&P 500.
Some companies are adding staff in the U.S. Vestas WindSystems A/S, the world’s largest wind-turbine maker, plans tohire 850 workers at its Colorado plants over the next year.
More Orders
“Throughout 2009 we didn’t see any orders in the U.S.whatsoever,” Vestas spokesman Michael Holm said in a telephoneinterview from the company’s Randers, Denmark, headquarters.“That is changing. We see the market is easing up.”
Another report from the Institute for Supply Management,due Aug. 4, will show service industries in the U.S. expanded inJuly at a slower pace compared with the previous month. Theindex of non-manufacturing businesses, which covers about 90percent of the economy, fell to a five-month low of 53, from53.8 in June, according to the survey median. Readings above 50signal expansion.
The housing market is one area showing signs of weakness inthe wake of an expired government tax incentive for homebuyers.Construction spending fell in June for a second consecutivemonth, dropping 0.5 percent after a 0.2 percent decline in May,economists said ahead of a report tomorrow from the CommerceDepartment.
An index of signed purchase agreements, or pending homeresales, climbed 3.7 percent in June after plunging a record 30percent the previous month, economists projected an Aug. 3report from the National Association of Realtors will show.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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ISM Manu Index 8/2 July 56.2 54.0
Construct Spending MOM% 8/2 June -0.2% -0.5%
Pers Inc MOM% 8/3 June 0.4% 0.2%
Pers Spend MOM% 8/3 June 0.2% 0.1%
Factory Orders MOM% 8/3 June -1.4% -0.3%
Pending Homes MOM% 8/3 June -30.0% 3.7%
ADP Payroll ,000’s 8/4 July 13 35
ISM NonManu Index 8/4 July 53.8 53.0
Initial Claims ,000’s 8/5 31-Jul 457 455
Nonfarm Payrolls ,000’s 8/6 July -125 -60
Private Payrolls ,000’s 8/6 July 83 90
Unemploy Rate % 8/6 July 9.5% 9.6%
Hourly Earnings MOM% 8/6 July -0.1% 0.1%
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