Analysts Expect Somber June Jobs Report
Jul 3 11:12am ET
By Caren Bohan
<<WASHINGTON (Reuters) - The U.S. economy is expected to have shed jobs in June for the third month in a row as profit pressures led some companies to slash workers and made others reluctant to fill empty positions, analysts said.
Most analysts thought the Labor Department's employment report, due out at 8:30 a.m. (1230 GMT) on Friday, would have a somber tone, in contrast to a handful of economic reports over the past few days that have been mildly upbeat.
U.S. economists in a Reuters survey projected a 44,000 decline in the number of workers on nonfarm payrolls in June. Payrolls dipped 19,000 in May and plummeted 182,000 in April.
The unemployment rate was seen climbing by two-tenths of a percentage point to 4.6 percent.
"It's a message that the labor market is still undergoing problems and that the Federal Reserve has more work cut out for it," said economist Chris Rupkey at Bank of Tokyo/Mitsubishi in New York.
Aiming to inject some life into the flagging economy, the U.S. central bank has cut interest rates six times this year.
But in its most recent move, on June 27, it opted to trim overnight rates by only a quarter percentage point. That was half the size of the five prior half-point moves and suggested to analysts that the Fed may be winding down its easing campaign as it waits to let the rate medicine work its way through the economy.
As the Fed assesses what steps to take next, the jobs report, as always, will be a key piece of the economic puzzle.
RECESSION, OR GROWTH SLOWDOWN?
Several economists said Friday's data could shed light on the key question of whether the U.S. economy is already contracting, or is merely suffering a slowdown in growth.
Economist Pierre Ellis at Decision Economics in New York, who sees a greater than 50-50 chance that the economy is already in recession, predicted a steep 150,000 drop in June payrolls.
"It would bring us one step closer to meeting the formal definition of a recession," Ellis said.
Economists loosely define a recession as two straight quarters of falling gross domestic product.
The Cambridge, Mass.-based National Bureau of Economic Research, which dates business cycles after the fact, uses a more complex series of criteria, including industrial production and employment trends, to diagnose recession.
In a June 18 memo, the NBER noted that industrial production has fallen "precipitously," but said declines in U.S. employment so far have been small compared to the last recession in 1990-91.
One component that economists will watch closely in the upcoming jobs report is aggregate hours worked, as declines in hours worked can sometimes indicate a drop in GDP.
But Rupkey cautioned, "The correlation between negative hours and negative GDP is not that great."
INFLATION WORRIES FADING
The jobs report is expected to show a 0.3 percent rise in average hourly earnings in June, matching the May rise. Analysts closely track that series for signs of inflation but several said that price pressures have waned as a worry so hourly earnings may not get as much attention as usual.
Although the consensus forecast called for a decline in payrolls, not everyone believed the picture would be bleak.
Joel Naroff of Naroff Economic Advisers in Holland, Pa. broke with the pack to predict a solid 145,000 rise in payrolls.
"I'm expecting a surprise on the positive side," said Naroff, who looked for some stability to emerge in the factory sector after months of sharp job losses.
Naroff noted that data trickling over the past week have failed to confirm doom-and-gloom economic scenarios.
For instance, on Monday, the Commerce Department reported that consumer spending held up well, rising 0.5 percent in both May and April.
And in a ray of hope for the battered factory sector, the National Association of Purchasing Management said its monthly index of manufacturing activity rose to 44.7 in June, the highest reading since November 2000.>> |
