Bloomberg News

Job Gains Probably Restrained in May Amid U.S. Fiscal Cutbacks

June 07, 2013

Job Gains Probably Restrained in May Amid U.S. Fiscal Cutbacks

The pace of job growth has slowed this quarter from the previous three months as fiscal restraint and weakness overseas prompt companies to temper hiring plans. Photographer: Andrew Harrer/Bloomberg

Employers in the U.S. probably created as many jobs in May as in the month before as higher taxes and federal budget cuts restrained the world’s largest economy.

Payrolls grew by 163,000 workers after increasing by 165,000 in April, according to the median of 90 forecasts in a survey by Bloomberg. The unemployment rate held at a four-year low of 7.5 percent, according to the survey.

The pace of job growth has slowed this quarter from the previous three months as fiscal restraint and weakness overseas prompt companies to temper hiring plans. While industries such as housing and energy are bright spots for the labor market, bigger payroll gains will be needed to move Federal Reserve policy makers closer to scaling back record monetary stimulus.

“It’s not like we’re falling off a cliff, it just feels like we’re throttling back a bit,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “It’s quite amazing the economy is holding up as well as it is given how hard the fiscal headwinds are.”

The Labor Department will release the jobs figures at 8:30 a.m. in Washington. Employment gains averaged 206,000 a month in the first quarter. Estimates for May payrolls ranged from 80,000 to 290,000. The agency surveys businesses and households for the pay period that includes the 12th of the month. There were five weeks between the April and May survey periods.

Private payrolls, which don’t include government agencies, grew by 175,000 workers in May after a gain of 176,000 the prior month, the survey showed.

Less Hiring

Before today’s report, other data signaled a pause in the improvement of the labor market. A report based on private payrolls earlier this week showed companies hired fewer workers than projected in May. Headcounts at businesses grew by 135,000 last month after a 113,000 gain in April, according to June 5 figures from the ADP Research Institute.

The Institute for Supply Management’s gauge of factory employment declined in May to the lowest level in six months. The group’s measure of employment in non-manufacturing industries that make up almost 90 percent of the economy fell to a 10-month low.

Fed policy makers have said they’ll continue their $85 billion-a-month pace of asset purchases until the labor outlook improves “substantially.” Boston Fed President Eric Rosengren and Chicago’s Charles Evans have said they want to see the economy add 200,000 jobs a month before scaling back.

Fed Outlook

Former Fed economist Vincent Reinhart, who is now chief U.S. economist at Morgan Stanley in New York, says that means policy makers need to see about four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases.

“They’re going to need a substantial run of data to change course,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics in White Plains, New York. “To actually do it, the economy not only has to be improved, but it has to be improved in such a way that it can take the strain of the new policy. The economy has to be in a position to take it and I don’t think it is just yet.”

Gross domestic product rose at an annualized rate of 2.4 percent from January through March. Growth will slow to a 1.6 percent pace in the second quarter as the effects of sequestration take hold, before improving to an average 2.4 percent rate in the second half of the year, according to the median forecast of economists surveyed by Bloomberg from May 3 to May 8.

Construction, Energy

At the same time, growth in home construction and energy has given a boost to companies such as Fluor Corp. (FLR:US) The engineering and equipment company based in Irving, Texas, projects its global staff will grow from 13,500 to 15,000 by the end of the year, said Peter Oosterveer, president of energy and chemicals.

Wage growth remains “modest”, with pay up between 3 percent and 5 percent in North America and Europe, Oosterveer said at a conference yesterday.

Other companies, from industrial giant Caterpillar Inc. (CAT:US) to insurer Genworth Financial Inc. (GNW:US), are adjusting payrolls to cut costs. Genworth, based in Richmond, Virginia, will eliminate 400 jobs as low interest rates squeeze investment income.

Caterpillar, the largest maker of construction and mining equipment, has responded to weaker global sales by delaying capital investments and requiring some employees to take unpaid leave, said Michael DeWalt, director of investor relations for the Peoria, Illinois-based company.

“Within corporate accounting, treasury, tax, about 90 percent of the people are taking three weeks of unpaid leave this year,” DeWalt said at a June 5 conference. “A lot of the actions that we’re taking are all around trying to match the cost base up with what the reality is of sales.”

                        Bloomberg Survey

================================================================
                           Nonfarm  Private     Manu Unemploy
                          Payrolls Payrolls Payrolls     Rate
                            ,000’s   ,000’s   ,000’s        %
================================================================

Date of Release              06/07    06/07    06/07    06/07
Observation Period             May      May      May      May
----------------------------------------------------------------
Median                         163      175        4     7.5%
Average                        164      175        3     7.5%
High Forecast                  290      220       15     7.7%
Low Forecast                    80       95       -5     7.4%
Number of Participants          90       51       26       86
Previous                       165      176        0     7.5%
----------------------------------------------------------------
4CAST                          150      165     ---      7.5%
ABN Amro                       175      185     ---      7.5%
Action Economics               165      180        0     7.5%
Ameriprise Financial           130      140       -5     7.6%
Banca Aletti                   154      183        5     7.5%
Bank of the West               160     ---         0     7.5%
Bank of Tokyo-Mitsubishi       170     ---      ---      7.4%
Banorte-IXE                    160     ---      ---      7.5%
Bantleon Bank AG               175     ---      ---      7.5%
Barclays                       175      185     ---      7.4%
Bayerische Landesbank          172     ---      ---      7.5%
BBVA                           175      184     ---      7.5%
BMO Capital Markets            150     ---      ---      7.5%
BNP Paribas                    160      180     ---      7.5%
BofA Merrill Lynch             150      165     ---      7.5%
Capital Economics              175     ---      ---      7.5%
CIBC World Markets             148     ---      ---      7.5%
Citi                           170      180        5     7.5%
ClearView Economics            180      185        7     7.5%
CohnReznick                    180      195     ---      7.5%
Comerica                       165     ---         5     7.5%
Commerzbank AG                 175      185     ---      7.5%
Credit Agricole CIB            150     ---      ---      7.5%
Credit Suisse                  150      160     ---      7.5%
Daiwa Securities America       190     ---      ---      7.5%
Danske Bank A/S                190      190        0     7.5%
DekaBank                       180     ---      ---      7.5%
Desjardins Group               200     ---      ---      7.5%
Deutsche Bank Securities       125      135     ---      7.5%
Deutsche Postbank AG           170     ---      ---      7.5%
DZ Bank                        170     ---      ---      7.5%
First Trust Advisors           148      155       -5     7.5%
FTN Financial                  155      165     ---      7.5%
Goldman, Sachs & Co.           175     ---      ---      7.5%
High Frequency Economics       150     ---      ---      7.5%
HSBC Markets                   147      154        3     7.5%
Hugh Johnson Advisors          140      158        0     7.6%
IDEAglobal                     180      195       10     7.5%
IHS Global Insight             155     ---      ---      7.5%
Informa Global Markets         180     ---         5     7.5%
ING Financial Markets          150      160       -5     7.5%
Intesa Sanpaolo                180     ---      ---      7.5%
J.P. Morgan Chase              180      190        0     7.4%
Janney Montgomery Scott        157      167        0     7.5%
Jefferies                      155      170        0     7.4%
John Hancock Financial         195     ---      ---      7.5%
Landesbank Berlin              125     ---      ---      7.4%
Landesbank BW                  150     ---      ---      7.5%
LinkUp                         290     ---      ---      ---
Lloyds Tsb Bank                183      194       11     7.5%
Maria Fiorini Ramirez          145      155     ---      ---
Market Securities              190     ---      ---      7.4%
MET Capital Advisors           181     ---      ---      7.5%
Mizuho Securities              150     ---      ---      7.5%
Modal Asset                   ---       150     ---      ---
Moody’s Analytics              150      155       -5     7.4%
Morgan Stanley                 170      185     ---      7.5%
National Bank Financial        145     ---      ---      7.6%
Natixis                        130     ---      ---      7.5%
Nomura Securities              160      170        3     7.4%
Nord/LB                        160     ---         5     7.5%
OSK Group/DMG                  153     ---      ---      7.5%
Oxford Economics               190      195     ---      7.5%
Pantheon Macroeconomics        125     ---      ---      7.5%
Paragon Research               132     ---      ---      7.5%
Pierpont Securities            155      175     ---      7.6%
PNC Bank                       200      205        5     7.5%
Prestige Economics             185     ---      ---      7.4%
Raiffeisenbank International   160      175     ---      7.5%
Raymond James                  165      175     ---      7.5%
RBC Capital Markets            180      190     ---      7.5%
RBS Securities                 175      190     ---      7.6%
Regions Financial              182      191        6     7.5%
Renaissance Macro Research     165      175     ---      7.5%
Santander                      160      170     ---      7.5%
Scotiabank                     150     ---      ---      7.5%
SMBC Nikko Securities          200      220     ---      7.5%
Societe Generale               210      220     ---      7.4%
Southbay Research              133      142     ---      ---
Southern Polytechnic State      80       95     ---      7.7%
Standard Chartered Bank        155      165     ---      7.5%
Stone & McCarthy               185      200       15     7.4%
TD Securities                  168      178        5     7.4%
TrimTabs                       135     ---      ---      ---
UBS                            200      205     ---      7.4%
UniCredit                      180     ---      ---      7.5%
Union Investment               131     ---      ---      7.6%
University of Maryland         165      175        5     7.5%
Wells Fargo & Co.              136     ---      ---      7.5%
Westpac Banking Co.            150     ---      ---      7.5%
Wrightson ICAP                 145      155     ---      7.5%
================================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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


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Companies Mentioned

  • FLR
    (Fluor Corp)
    • $74.6 USD
    • -1.10
    • -1.47%
  • CAT
    (Caterpillar Inc)
    • $104.69 USD
    • 0.54
    • 0.52%
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