Payrolls in January probably grew at a pace that underscores the Federal Reserve’s concern it will take years for the job market to recover from the recession, economists said before a report this week.
Employment increased by 140,000 workers this month after a 103,000 gain in December, according to the median forecast of 59 economists surveyed by Bloomberg News ahead of Labor Department data on Feb. 4. The report may also show the jobless rate increased to 9.5 percent from 9.4 percent.
The world’s largest economy has yet to grow fast enough to make a bigger dent in unemployment, explaining why Fed policy makers are going ahead with a plan to buy $600 billion in assets. Companies like Ford Motor Co. and Lowe’s Cos. have announced they’ll hire this year to spur sales, which may signal payroll additions will accelerate in coming months.
“Companies will increase hiring as they can’t keep pushing their existing workforce any further,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We’ll see a gradual improvement in the labor market. The Fed will complete what it has started.”
Other reports this week may show factories and service industries expanded as consumers and businesses kept spending.
The projected increase in the jobless rate would mean it has exceeded 9 percent for 21 consecutive months, the longest stretch of elevated unemployment since records began in 1948.
The economy grew at a 3.2 percent annual rate in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years, a Commerce Department report showed last week.
A Commerce Department report tomorrow may show household purchases, which account for about 70 percent of the economy, picked up heading into this year. Personal spending rose 0.5 percent in December as incomes climbed 0.4 percent, according to the Bloomberg survey median.
Investors propelled retail stocks as spending improved. The Standard & Poor’s Supercomposite Retailing Index climbed 26 percent last year, while the broader S&P 500 advanced 13 percent.
Faster growth is needed to reduce the unemployment rate, which economists surveyed by Bloomberg this month projected will average more than 9 percent this year. Hiring also must ramp up to help recoup the loss of 8.4 million jobs as a result of the worst recession since the 1930s, which began in December 2007 and ended in June 2009. For all of 2010, the U.S. added about 1.1 million jobs, the most since 2006.
“The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions,” the Fed said in a statement after its Jan. 25-26 policy meeting. “The unemployment rate is elevated.”
Bad weather may have played a role in depressing payrolls this month. A winter storm that spread from the Midwest and the South to Boston during the Labor Department’s reference week, which includes the 12th of a month, could reduce January payrolls by 50,000, economists at UBS Securities LLC in Stamford, Connecticut, led by Maury Harris, said in a note to clients on Jan. 12.
Factories remain a key part of the expansion. The Tempe, Arizona-based Institute for Supply Management’s manufacturing index, due Feb. 1, fell to 58 in January, from an eight-month high of 58.5 in December, economists projected in the Bloomberg survey. Readings above 50 signal growth.
The recovery is reflected in expansion plans at the two largest U.S. automakers. Dearborn, Michigan-based Ford, which on Jan. 10 revealed three new electric or hybrid vehicles to the public, said it may hire more than 7,000 workers in the next two years. Larger rival General Motors Co., based in Detroit, on Jan. 24 said it will add a third shift and about 750 jobs to its assembly plant in Flint, Michigan, to meet demand for pickups.
Service industries, which make up about 90 percent of the economy and include financial firms, retailers and business consultants, also are growing. ISM’s non-manufacturing gauge was little changed at 57 from a December reading of 57.1 that was the highest since May 2006, economists projected. The report is due Feb. 3.
The same day, Labor Department figures may show the productivity of American workers grew at a 2 percent pace in the final three months of 2010 after rising 2.3 percent in the third quarter as companies controlled costs.
Lowe’s, the second-biggest U.S. home-improvement retailer, is among firms trying to improve efficiency. The chain plans to cut 1,700 middle-management jobs as profit growth trails that of larger rival Home Depot Inc. Mooresville, North Carolina-based Lowe’s will also add 8,000 to 10,000 weekend sales positions to improve staffing at the busiest time of the week.
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