Employment probably rose for a thirdmonth in December, bringing U.S. payroll growth last year toabout 1 million and pointing to further improvement in the labormarket in 2011, economists said before a report this week.
A projected 140,000 gain in December payrolls is the medianforecast of 61 economists surveyed by Bloomberg News before theJan. 7 report from the Labor Department. The unemployment ratemay have eased to 9.7 percent from 9.8 percent. Other reportsmay show faster growth at the nation’s factories and serviceindustries last month.
Bigger employment and income gains may help boost sales atcompanies like Bed Bath & Beyond Inc., allowing the expansion tobecome well-rooted. Even with the labor market improvement in2010, it will take years to make up for the 8.4 million jobslost during the 18-month recession that ended in June 2009.
“Things are improving but it’s a gradual momentum that’sbuilding,” said Michelle Meyer, a senior economist at Bank ofAmerica Merrill Lynch Global Research in New York. “It allcomes back to the labor market and so far the jobs recovery hasbeen disappointing.”
Estimates for the increase in December payrolls ranged from95,000 to 215,000 after a 39,000 rise a month earlier and a172,000 gain in October.
Private payrolls, which exclude government agencies, roseby 155,000 last month after a 50,000 November gain, the surveyshowed. Including the projected increase for December, companiesadded about 1.3 million workers last year, the most since 2006.
Indications the economy is improving and will create theconditions for further employment growth helped fuel gains inthe stock market last year at the same time companies reportedstronger earnings.
Stocks Surge
The Standard & Poor’s 500 Index rose 13 percent in 2010after a 23 percent jump in 2009, making it the biggest two-yearadvance since the Internet-bubble rally of 1998 and 1999.
Even with the pickup in hiring, the jobless rate has shownfew signs of declining. December is forecast to be the 17thmonth in which unemployment has been 9.5 percent or higher. Forall of 2010, joblessness likely averaged 9.7 percent, the worstyear since 1982.
States and municipalities with growing budget gaps arecutting spending and reducing headcount. Florida may cut 5percent of its state workforce to save costs, Governor-elect Rick Scott said in an interview Dec. 3 on Bloomberg Television’s“InBusiness With Margaret Brennan.”
‘Jobs Go Away’
“Our government has grown too fast compared to the privatesector,” said Scott, 58. “When that happens, jobs go away, sowe have to reduce the size of government.”
High unemployment explains why Federal Reserve policymakers said they need to follow through on their plan topurchase an additional $600 billion of assets by June.
“The economic recovery is continuing, though at a ratethat has been insufficient to bring down unemployment,” Fedofficials said in a statement after their Dec. 14 policymeeting. Minutes of the Fed’s Open Market Committee meeting willbe released Jan. 4.
The struggling labor market is also a reason why President Barack Obama negotiated an accord with Congress to pass an $858billion bill extending all Bush-era tax cuts for two years. Thebill also continues expanded unemployment insurance benefitsthrough 2011 and cuts payrolls taxes by 2 percentage points.
“While it appears that the economic environment hasstabilized and is perhaps improving, persistent highunemployment and uncertainty in the economy could continue topressure consumers and affect their spending,” Steven Temares,chief executive officer at Union, New Jersey-based Bed Bath &Beyond, said on a teleconference with analysts Dec. 22. Still,“we remain cautiously optimistic,” he said.
Holiday Sales
The improvement in the labor market has been enough togenerate more sales for retailers. Holiday purchases jumped 5.5percent, the best performance since 2005, said MasterCardAdvisors’ SpendingPulse, which measures retail sales by allpayment forms. That compared with a 4.1 percent gain a yearearlier. The numbers include Internet sales and excludeautomobile purchases.
Factories continue at the forefront of the expansion thatbegan in June 2009, while service industries from finance toretail and business consulting are improving.
The Tempe, Arizona-based Institute for Supply Management’sfactory index rose to 57 in December, the highest in sevenmonths, from 56.6 the prior month, economists surveyed byBloomberg forecast the group will report tomorrow. A readinghigher than 50 signals growth.
ISM’s gauge of service industries, which make up about 90percent of the economy, may rise to 55.7 in December, thehighest since May 2006, from 55, economists forecast before theJan. 5 report.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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ISM Manu Index 1/3 Dec. 56.6 57.0
Construct Spending MOM% 1/3 Nov. 0.7% 0.2%
Factory Orders MOM% 1/4 Nov. -0.9% -0.2%
Vehicle Sales Mlns 1/4 Dec. 12.3 12.3
ISM NonManu Index 1/5 Dec. 55.0 55.7
Initial Claims ,000’s 1/6 25-Dec 388 405
Nonfarm Payrolls ,000’s 1/7 Dec. 39 140
Private Payrolls ,000’s 1/7 Dec. 50 155
Manu Payrolls ,000’s 1/7 Dec. -13 0
Unemploy Rate % 1/7 Dec. 9.8% 9.7%
Hourly Earnings MOM% 1/7 Dec. 0.0% 0.2%
Cons. Credit $ Blns 1/7 Nov. 3.4 0.5
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