Employers probably added workers in December at about the same pace as in the prior month, a sign the U.S. labor market sustained gains even as lawmakers were struggling to reach a budget deal, economists said before a report today.
Payrolls rose by 153,000 workers after increasing by 146,000 in November, according to the median forecast of 79 economists surveyed by Bloomberg. The unemployment rate may have held at 7.7 percent, the lowest since December 2008.
Improved hiring is helping underpin consumer spending at retailers from Macy’s Inc. (M:US) to Gap Inc., where December sales beat analysts’ estimates. Even bigger advances in employment may need to wait for lawmakers to reach further agreement on a deficit-reduction plan after Congress this week averted income- tax increases on about 99 percent of households.
“There was some decent momentum in the labor market heading into 2013,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “The payrolls numbers would have been better in the absence of fiscal cliff concerns. Assuming the second round of fiscal negotiations is resolved, we could see an acceleration in the back half of the year.”
The Labor Department’s report is due at 8:30 a.m. in Washington. Bloomberg survey estimates ranged from increases of 80,000 to 305,000.
Today’s Labor Department report will include revisions to the household survey, which is used to calculate the monthly unemployment rate. Data for the past five years are under review.
Private employment, which excludes government agencies, climbed by 150,000 in December following a 147,000 increase the prior month, economists projected.
At 10 a.m., a report from the Institute for Supply Management may show its services index, which covers almost 90 percent of the economy, eased to 54 in December from the prior month’s 54.7 reading, according to the Bloomberg survey. A gauge above 50 signals expansion.
Progress in the labor market is underpinning Americans’ confidence and spending. Macy’s, the second-biggest U.S. department-store company, reported a 4.1 percent rise in December sales at stores open at least a year, while Gap, the largest U.S. specialty-apparel retailer, had a 5 percent increase.
Last year through November, payroll gains averaged about 151,500 a month compared with 147,000 in the same period of 2011. The U.S. has recovered 4.6 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.
Stocks fell yesterday after minutes of the Federal Reserve’s December meeting showed policy makers said they will probably end $85 billion in monthly bond purchases this year. The Standard & Poor’s 500 Index (SPX) dropped 0.2 percent to 1,459.37 at the close in New York. The S&P 500 surged 2.5 percent the previous day, the biggest jump since December 2011, after Congress passed the bill averting the so-called fiscal cliff of $600 billion in tax increases and government spending cuts.
At the same time, a battle still looms over raising the $16.4 trillion debt limit and on automatic spending reductions, known as sequestration, that were delayed for two months.
Some chief executive officers including David Cote of Honeywell International Inc. (HON:US) are urging lawmakers to move quickly.
“A plan that will truly help to expand the U.S. economy over the long term” is needed, Cote, who leads the maker of flight controls and thermostats, said in a Jan. 2 e-mailed statement.
“We’re in the same old fight with uncertainty still in the market,” said Brad Thompson, CEO of employee-owned Columbia Forest Products Inc., the largest North American maker of decorative hardwood plywood.
A bigger pickup in hiring was probably thwarted in late 2012 by concern over the possibility of fiscal tightening. Cintas Corp. (CTAS:US), a Cincinnati-based provider of uniforms and safety products, noted a “wait-and-see attitude” among clients, Chief Financial Officer William Gale said on a Dec. 20 earnings call with analysts.
In contrast, Winnebago Industries Inc. (WGO:US), a Forest City, Iowa-based maker of motor homes, was expanding to increase production. The company hired about 160 people, or 12 percent more hourly employees, in the quarter ended Dec. 1.
“We’re still supplementing by working overtime in many, many areas of the company,” Sarah Nielsen, chief financial officer, said on a Dec. 20 earnings conference call. “That’s been a factor for the last six months plus. And we’re going to have to continue to hire to support attrition.”
The goal of faster progress in the economy and labor market is one reason Federal Reserve policy makers, four years after cutting the main interest rate to around zero, have expanded their third round of so-called quantitative easing. The central bank on Dec. 12 said it would hold their target interest rate low “at least as long” as the unemployment rate remains above 6.5 percent and inflation projections are for no more than 2.5 percent.
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