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US jobs report to provide gauge of recovery

US jobs report to provide gauge of recovery
AFP
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First Published: Fri, Aug 07 2009. 12 24 PM IST
Updated: Fri, Aug 07 2009. 12 24 PM IST
Washington: A jobs report to be released Friday, president Barack Obama’s 200th day in office, will offer fresh clues on the pace of healing in the ailing US economy, widely expected to emerge from recession this year.
The nonfarm payrolls report, seen as one of the best indicators of economic momentum, is expected to show further job slashing in July -- an estimated 328,000 jobs shed, based on analyst forecasts -- still negative but showing an improving trend.
The unemployment rate is expected to tick up to 9.6% from its current 26-year high of 9.5%.
The report comes amid projections of a return to growth in the second half of 2009 but also fears that a recovery could be stymied by high joblessness, which has dented consumer spending and confidence needed for recovery.
The White House acknowledged it would take time to turn the job front around.
“We’re going to get a jobs report tomorrow that’s likely to show another several hundred thousand jobs lost,” White House spokesman Robert Gibbs told CNN late Thursday.
“We believe we’ve made tremendous strides in pulling the economy back from the brink of another depression. But it’s obvious that we’ve got ways to go to create jobs, get people back to work and provide them the type of long-term job growth that the president expects.”
Gibbs said it will “be many months before we can get people back to work.”
Economist Dean Maki at Barclays Capital, predicting a narrowing of job losses to 275,000, said the July employment report “should show a further gradual improvement in the labor market.”
Maki and others point out that manufacturing appears to be rebounding, with hiring resuming in the automotive sector to ramp up production in light of rising sales, helped by the “Cash for Clunkers” trade-in incentives.
Maki said he sees “a sharp increase in industrial production in July” that will show up in a rise in the work week, boosting aggregate hours, sometimes seen as a proxy of economic activity.
“The work week typically trends higher in the early stages of expansion as employers increase output from the current workforce, rather than ramp up hiring,” Maki said.
Others pointed to signs of a rebound in the factory sector, led by autos.
“Just to catch up, vehicle production surged about 60 percent in July over June, and seems likely to rise further through the summer,” said Richard Berner, economist at Morgan Stanley.
The latest data from the labor market provided a mixed picture.
New claims for US unemployment benefits fell to 550,000 in the week ended on August 1. That was below the revised 588,000 new claims filed in the preceding week, and lower than the average analyst forecast of 580,000.
Joseph LaVorgna at Deutsche Bank said the improvement in weekly claims portends smaller job losses in the monthly report, as little as 150,000.
“We are seeing an increase in new orders in various production surveys, and we think the improvement in jobless claims in recent weeks is also significant,” he said.
“As a result, we think that nonfarm employment is poised for a significant improvement sometime in the relatively near future.”
A separate survey by payrolls firm ADP said the world’s largest economy shed 371,000 jobs in the private sector in July, more than the 350,000 expected by most analysts.
Obama and the US Federal Reserve have warned that unemployment could reach 10 percent or higher by the end of the year.
Some say employment will be slow to recover even if the economy is growing.
“The job cuts have been more severe and widespread than during past recessions,” said Ed Yardeni at Yardeni Research.
“This is because businesses increasingly treat labor much more like a variable than a fixed cost,” Yardeni said.
“Businesses seem to be betting that when their sales recover, they’ll be able to increase output with greater productivity. If my analysis is correct, then the employment recovery will be lackluster.”
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First Published: Fri, Aug 07 2009. 12 24 PM IST
More Topics: US | Jobs | Barack Obama | Unemployment | Barack Obama |