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Week Ahead: Jobless Rate Remains Near 10%

Sunday, 31 October 2010 05:33 PM

Unemployment in the U.S. probably kept hovering near 10 percent in October, one reason the recovery that began more than a year ago has disappointed Federal Reserve policy makers, economists said before a report this week.

The jobless rate held at 9.6 percent for a third month, according to the median of 61 estimates in a Bloomberg News survey heading into a Nov. 5 report from the Labor Department. Payrolls likely rose by 60,000, the first gain since May.

Figures last week showed third-quarter growth and inflation in the world’s largest economy fell short of the Fed’s long-term forecasts. Speculation the central bank will announce another round of large-scale asset purchases, or quantitative easing, after its Tuesday-Wednesday meeting propelled stocks this month and pushed the yield on two-year Treasury notes to a record low.

“We still have a ways to go to improve the job market,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “The payrolls report will confirm the necessity of the quantitative easing the Fed is expected to announce. Unemployment will remain stubbornly high.”

The jobs report may show private hiring, which excludes government agencies, climbed 80,000 after a 64,000 gain the prior month. Overall payrolls fell 95,000 in September, reflecting the dismissal of temporary workers hired by the government for the population count.

The unemployment rate projection for October would make it the 15th month of joblessness at 9.5 percent or higher, the longest stretch since records began in 1948. The worst recession since the 1930s caused the loss of 8.4 million jobs.

The need to lift the labor market is one reason investors expect more steps from the Fed, which has already cut interest rates almost to zero and bought $1.7 trillion in securities.

“To the extent that we can do things to improve the economic environment, we certainly owe it to the millions of people who are unemployed to do so,” Fed Bank of New York President William Dudley said in response to audience questions after a speech on Oct. 25.

Fed and government stimulus has helped to sustain the rebound. The U.S. expanded at a 2 percent annual rate last quarter, up from a 1.7 percent pace the prior three months, the Commerce Department reported Oct. 29.

Consumer spending, which accounts for about 70 percent of gross domestic product, climbed 2.6 percent last quarter, the best showing of the recovery that began in June 2009, as retailers like Wal-Mart Stores Inc. cut prices to lure shoppers.

A Commerce Department report Monday may show household spending rose for a third month in September, while income growth slowed, according to the Bloomberg survey. The figures may also show inflation cooled.

Expectations of more Fed action and rising corporate profits helped lift the Standard & Poor’s 500 Index 3.7 percent in October, its second monthly advance. The gauge was down less than 0.1 percent on Oct. 29 to close at 1,183.26 in New York.

Even so, likely voters heading to the polls Tuesday for congressional elections think there hasn’t been much progress on the economy, a Bloomberg National Poll conducted Oct. 24-26 found.

Among other reports this week, the Institute for Supply Management’s manufacturing index, due Monday, may show factory gains are cooling after an inventory surge that put the industry at the helm of the recovery. The Tempe, Arizona-based ISM’s gauge of services, to be released Wednesday, probably was little-changed from September, the Bloomberg survey showed.

Some companies plan to expand. Cedar Rapids, Iowa-based Rockwell Collins Inc., a maker of cockpit instruments and radios, last week said it’ll add 800 people, boosting staff by 4 percent during the next 12 months. Ford Motor Co., the second- largest U.S. automaker, said it will spend $850 million and add 1,200 jobs in Michigan by 2013 as sales rebound.

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Unemployment in the U.S. probably kept hovering near 10 percent in October, one reason the recovery that began more than a year ago has disappointed Federal Reserve policy makers, economists said before a report this week.The jobless rate held at 9.6 percent for a third...
Sunday, 31 October 2010 05:33 PM
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