Employment probably rose for a third month in December, bringing U.S. payroll growth last year to about 1 million and pointing to further improvement in the labor market in 2011, economists said before a report this week.
A projected 140,000 gain in December payrolls is the median forecast of 61 economists surveyed by Bloomberg News before the Jan. 7 report from the Labor Department. The unemployment rate may have eased to 9.7 percent from 9.8 percent. Other reports may show faster growth at the nation’s factories and service industries last month.
Bigger employment and income gains may help boost sales at companies like Bed Bath & Beyond Inc., allowing the expansion to become well-rooted. Even with the labor market improvement in 2010, it will take years to make up for the 8.4 million jobs lost during the 18-month recession that ended in June 2009.
“Things are improving but it’s a gradual momentum that’s building,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “It all comes back to the labor market and so far the jobs recovery has been disappointing.”
Estimates for the increase in December payrolls ranged from 95,000 to 215,000 after a 39,000 rise a month earlier and a 172,000 gain in October.
Private payrolls, which exclude government agencies, rose by 155,000 last month after a 50,000 November gain, the survey showed. Including the projected increase for December, companies added about 1.3 million workers last year, the most since 2006.
Indications the economy is improving and will create the conditions for further employment growth helped fuel gains in the stock market last year at the same time companies reported stronger earnings.
The Standard & Poor’s 500 Index rose 13 percent in 2010 after a 23 percent jump in 2009, making it the biggest two-year advance since the Internet-bubble rally of 1998 and 1999.
Even with the pickup in hiring, the jobless rate has shown few signs of declining. December is forecast to be the 17th month in which unemployment has been 9.5 percent or higher. For all of 2010, joblessness likely averaged 9.7 percent, the worst year since 1982.
States and municipalities with growing budget gaps are cutting spending and reducing headcount. Florida may cut 5 percent of its state workforce to save costs, Governor-elect Rick Scott said in an interview Dec. 3 on Bloomberg Television’s “InBusiness With Margaret Brennan.”
“Our government has grown too fast compared to the private sector,” said Scott, 58. “When that happens, jobs go away, so we have to reduce the size of government.”
High unemployment explains why Federal Reserve policy makers said they need to follow through on their plan to purchase an additional $600 billion of assets by June.
“The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment,” Fed officials said in a statement after their Dec. 14 policy meeting. Minutes of the Fed’s Open Market Committee meeting will be released Jan. 4.
The struggling labor market is also a reason why President Barack Obama negotiated an accord with Congress to pass an $858 billion bill extending all Bush-era tax cuts for two years. The bill also continues expanded unemployment insurance benefits through 2011 and cuts payrolls taxes by 2 percentage points.
“While it appears that the economic environment has stabilized and is perhaps improving, persistent high unemployment and uncertainty in the economy could continue to pressure consumers and affect their spending,” Steven Temares, chief executive officer at Union, New Jersey-based Bed Bath & Beyond, said on a teleconference with analysts Dec. 22. Still, “we remain cautiously optimistic,” he said.
The improvement in the labor market has been enough to generate more sales for retailers. Holiday purchases jumped 5.5 percent, the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.
Factories continue at the forefront of the expansion that began in June 2009, while service industries from finance to retail and business consulting are improving.
The Tempe, Arizona-based Institute for Supply Management’s factory index rose to 57 in December, the highest in seven months, from 56.6 the prior month, economists surveyed by Bloomberg forecast the group will report tomorrow. A reading higher than 50 signals growth.
ISM’s gauge of service industries, which make up about 90 percent of the economy, may rise to 55.7 in December, the highest since May 2006, from 55, economists forecast before the Jan. 5 report.
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