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Incomes Signal US Creating More Jobs, Spending May Accelerate

Tuesday, 23 November 2010 04:14 PM

Wages and salaries in the second quarter climbed almost twice as much as previously estimated, indicating the U.S. economy may have created more jobs.

Pay jumped by $97.4 billion at an annual pace from the first quarter, up from a previously reported $51.1 billion gain, revised figures from the Commerce Department showed today in Washington. The data reflect a more comprehensive accounting of employment and earnings than was available to the Labor Department in tabulating the monthly job count.

“There was a little more hiring than the monthly payroll surveys certainly suggested,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said in an interview. While bonus payments may have been responsible for similar revisions in previous year’s, reflecting the financial industry’s “heyday,” the improvement now is probably due instead to bigger gains in overall employment, said Stanley.

Today’s Commerce Department report also showed a bigger increase in consumer spending last quarter than previously estimated, even as savings were also revised up, showing how income gains are helping households repair tattered finances. Hewlett-Packard Co. is among companies saying they are planning to boost pay, while Citigroup Inc. is among those saying it’ll add more workers.

Households’ need to rebuild savings “is further along than we thought it was,” said Stanley. “I see consumer spending healthier next year than this year.”

Wages Climb

Wages increased by another $51.4 billion from July through September, capping a 2.8 percent gain over the past four quarters and marking the best year-over-year performance since mid 2008. Consumer spending, which accounts for about 70 percent of the economy, advanced at a 2.8 percent annual pace, the most in almost four years, today’s report showed.

The savings rate, or the share of disposable incomes households were able to sock away, climbed to 6.2 percent in the second quarter and was 5.8 percent in the July to September period, today’s report showed. The data was revised up from prior estimates of 5.9 percent and 5.5 percent respectively.

“We’re building a good track for 2011,” Joseph LaVorgna, chief economist at Deutsche Bank Securities Inc. in New York, said in an interview. “Corporate profits have been pointing to a stronger labor market than what we’ve seen at this point. Eventually we’re going to get some stronger numbers.”

Profits rose 2.8 percent last quarter from the previous three months, and have been up each quarter since the first three months of 2009, today’s Commerce Department data showed.

Holiday Shopping

Retailers are projecting a better holiday shopping period and also are boosting discounts to bring more consumers to the stores. The National Retail Federation has forecast November- December holiday sales will rise by 2.3 percent from a year ago, the most since 2006.

HP, the world’s largest computer maker, yesterday forecast profit for the period ending in January that topped analysts’ projections as businesses replace aging personal computers and other equipment. The firm will reinstitute salary raises in the current fiscal year, chief executive officer Leo Apotheker said.

Employers added 151,000 workers to their payrolls in October, the first rise in five months, the Labor Department reported this month. Measures of hours worked and wages also increased. The government will release its November report next week.

Quarter Census

Today’s income revisions are derived from a quarterly census of employment and wages based in tax records that cover almost all employers, making them a more accurate depiction of what’s happening in the labor market. The monthly payrolls numbers are based on a survey of about 140,000 businesses covering 410,000 worksites that account for about one-third of total payrolls.

Not all economists were optimistic about the gain in incomes. With companies unable to raise prices and households still needing to repair their balance sheets, firms will want to control their costs and limit hiring, said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York.

“Companies are going to do their best to minimize labor- cost increases,” Shapiro said.

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Wages and salaries in the second quarter climbed almost twice as much as previously estimated, indicating the U.S. economy may have created more jobs.Pay jumped by $97.4 billion at an annual pace from the first quarter, up from a previously reported $51.1 billion gain,...
Tuesday, 23 November 2010 04:14 PM
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