Bloomberg News

Employment Probably Increased in June: U.S. Economy Preview

July 03, 2011

July 3 (Bloomberg) -- Employers in the U.S. probably expanded payrolls at a pace that failed to reduce the unemployment rate in June as companies sought to contain costs amid slower growth, economists said a report may show this week.

Payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due July 8. The jobless rate held at 9.1 percent. Another report may show growth in services cooled.

A recovery that Federal Reserve Chairman Ben S. Bernanke said is “frustratingly slow” explains why employers such as Lockheed Martin Corp. and Gannett Co. are cutting positions or becoming reluctant to add as many workers. Faster payroll growth is needed to spur consumer spending that accounts for 70 percent of the economy.

“We’re going through a slow patch in hiring,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “June payrolls will be better than May but still far short of what is needed to bring down unemployment. That’s not good for demand.”

The projected gain would be less than the 166,000 monthly average in the first quarter of the year. Payroll increases of around 200,000 a month are needed for a sustained decline in the unemployment rate, Brown said.

While the economic recovery started in June 2009, the labor market has been slow to improve, taking a toll on President Barack Obama’s approval ratings. Since he took office in January 2009, unemployment has increased by about a percentage point and the economy has lost 2.5 million jobs.

By a 44 percent to 34 percent margin, Americans say they believe they are worse off than when Obama took office, according to a Bloomberg National Poll conducted June 17-20.

Private Payrolls

The Labor Department employment report will also show private payrolls, which exclude government agencies, increased by 125,000 after rising 83,000 in May, according to the survey median.

“Recent labor market indicators have been weaker than anticipated,” Fed policy makers said in a statement after their June 21-22 meeting. “The economic recovery is continuing at a moderate pace, though somewhat more slowly” than anticipated, partly reflecting “temporary” factors, they said.

Bernanke said at a news conference after the meeting that policy makers “expect the unemployment rate to continue to decline but the pace of progress remains frustrating slow.”

Cuts at Newspapers

Lockheed Martin, the world’s largest defense contractor, on June 30 said it plans to cut about 1,500 employees from its Aeronautics business unit that makes F-35 jet fighters. The reductions will be spread across several states including Texas, Georgia and California, the Bethesda, Maryland-based company said.

McLean, Virginia-based Gannett, the publisher of 82 newspapers including USA Today, said in June it is eliminating about 700 jobs at its community-newspaper unit amid weakness in local and national advertising.

The economic recovery is not happening “as quickly or favorably as we had hoped,” Bob Dickey, president of Gannett’s U.S. community publishing division, said in a memo. “While we are seeing improved circulation results and audience growth, weakness in the real estate sector, slow job creation and now softer auto ad demand continue to challenge revenue growth.”

The economy may be starting to rebound from a first-half slowdown, according to reports last week. Manufacturing picked up in June as components supply disruptions related to the earthquake in Japan eased. The Institute for Supply Management’s factory index rose to 55.3 from 53.5 in May, the Tempe, Arizona- based group said July 1.

Factory Orders

A Commerce Department report on July 5 is projected to show orders placed with factories rebounded 1 percent in May after falling in April by the most in almost a year.

Investors are counting on manufacturing, which has led the recovery, to keep bolstering growth. The Standard & Poor’s Supercomposite Machinery Index has climbed 5.6 percent from the beginning of June through July 1, outpacing the broader S&P 500, which gained 1.9 percent.

Services industries, which cover about 90 percent of the economy, expanded at a slower pace in June, a report may show on July 6. The Institute for Supply Management’s index of non- manufacturing businesses eased to 53.6 from 54.6 in May, according to the Bloomberg News survey.

--With assistance from Kristy Lynn Scheuble in Washington. Editors: Vince Golle, Christopher Wellisz

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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