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Payrolls in U.S. Probably Fell at Slower Pace, Joblessness Rose
Share Business ExchangeTwitterFacebook| Email | Print | A A A By Timothy R. Homan

Nov. 6 (Bloomberg) -- U.S. employers probably cut the fewest jobs in October in more than a year as the economic recovery eased the worst labor-market slump since the 1930s, economists said before a report today.

Payrolls fell by 175,000 workers, the smallest drop since August 2008, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate may have climbed to a 26-year high of 9.9 percent, the survey also showed.

Companies such as Deere & Co. are starting to recall staff after the world’s largest economy expanded last quarter at the fastest pace in two years, while Johnson & Johnson is among those cutting back further. Mounting unemployment is one reason Federal Reserve policy makers this week reiterated a pledge to keep their key interest rate low for an “extended period.”

“Employers remain cautious,” said Chris Low, chief economist at FTN Financial in New York. “As a result, employers are unlikely to start expanding their employee base any time soon, but are also unlikely to continue rapid layoffs.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 105,000 to 250,000.

The October projection would bring total jobs lost since the recession began in December 2007 to 7.4 million, the biggest decline of any economic slump since the Great Depression. Monthly losses accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and peaked at 741,000 in January.

Temporary Help

Neal Soss, chief economist at Credit Suisse in New York, is among those saying today’s report may show an increase in hiring of temporary workers, which will be a harbinger of gains in overall employment. Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.

Economists surveyed by Bloomberg last month projected the jobless rate will exceed 10 percent by early 2010 and average 9.9 percent for all of next year even as the economy expands 2.4 percent.

Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the jobless rate is “the dominant variable driving changes in the fed funds” rate, and the central bank “has never raised rates with unemployment rising.”

Voter Discontent

Voters in Virginia and New Jersey this week took out their frustration over joblessness on the political party in charge. The economy and jobs were the most important issues as Republicans won governorships in both states held by Democrats, according to election polls.

President Barack Obama in February signed into law a $787 billion stimulus package aimed at reviving growth and stemming job losses. The administration said last week that the plan was directly responsible for saving or creating about 640,000 jobs. Exit polling this week showed six in 10 New Jersey voters and 55 percent of Virginians said Obama didn’t influence their vote.

The U.S. economy grew last quarter for the first time in a year, expanding at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.

Job Cuts

Some companies are cutting payrolls amid concern spending will cool as government assistance wanes. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health- products company, said Nov. 3 it will shrink its workforce by as much as 7 percent, or 7,000 workers.

Other companies are gaining confidence. Deere, the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.

Cisco Systems Inc.’s John Chambers, one of the first technology leaders to herald the recession two years ago, said yesterday he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter.

“The numbers are indicating us being in the early, initial phase of a recovery -- with the U.S. leading the way,” Chambers said in an interview.

After reaching a 13-year low on March 9, the Standard & Poor’s 500 Index has gained 58 percent as the economy showed signs of recovering.