American companies may need to start boosting payrolls this year
The worst US employment slump in the post-World War II era may have almost ended in December, signaling the recovery will not be jobless much longer, economists said before reports this week.
Payrolls probably fell by 1,000 workers last month, the smallest drop since the recession began two years ago, according to the median of 58 economists surveyed by Bloomberg News ahead of a January 8 Labor Department report. The unemployment rate may have climbed to 10.1 per cent from 10 per cent.
Stimulus-driven gains in global demand mean American companies may need to start boosting payrolls in 2010 after eliminating 7.2 million jobs since the recession began in December 2007. Manufacturers are leading the rebound in growth as a pickup in orders and rising exports, combined with a record reduction in inventories, spurs production.
“Businesses are starting to come out of their shells,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We have turned the corner convincingly and have started on a path toward growth.”
The declines in payrolls the last two years have been the biggest as a percentage of all jobs since 1944-45.
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A 10.1 per cent reading in December would put the average jobless rate last year at 9.3 per cent. The increase from 5.8 per cent in 2008 would mark the biggest annual surge in records going back to 1940.
Economists anticipate the jobless rate will exceed 10 per cent through the first half of this year, according to the median forecast of economists surveyed last month.
President Barack Obama last month proposed additional spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of efforts to cut the jobless rate.
Lawrence Summers, the White House chief economic adviser, said in a Bloomberg Radio interview on December 15 that the prospect of a return to job growth is “an important achievement.”
The economy grew at a 2.2 per cent annual rate in the third quarter, the first gain in more than a year. The median projection of economists surveyed in December anticipated growth of 3 per cent in the last three months of 2009. Since the survey, economists at JPMorgan Chase & Co and Credit Suisse have revised estimates to more than 4 per cent.
Staffing at temporary employment agencies jumped the most in five years in November, which some economists and executives view as a sign total payroll growth is imminent.
Increases in temporary hiring are “a classic part of the recovery,” Manpower Inc Chief Executive Officer Jeffrey Joerres said in a Bloomberg Television interview on December 31. The firm is seeing “slow but steady increases in people who are out on assignment. It’s a little bit in every office, which is a good sign because it’s broad-based.”
Manufacturing, which accounts for about 12 per cent of the economy, has been a driver of the recovery and is projected to continue to expand. The Institute for Supply Management may report tomorrow its factory index rose last month to 54, according to the survey median. The gauge has surpassed the breakeven level of 50 since August.
A separate report from the Commerce Department on January 5 may show factory bookings increased 0.5 per cent in November after rising 0.6 per cent the previous month, according to economists surveyed.
Another report from the supply managers may show the broader economy returned to expansion in December. The group’s gauge covering non-manufacturing firms, due January 6, probably rose to 50.5, according to the survey median.
US stocks rallied in the second half of the year as evidence of an economic recovery mounted. The Standard & Poor’s 500 Index climbed 65 per cent since sinking to a 12-year low on March 9, ending 2009 at 1,115.1.
Reports on housing this week may show the market slowing after a government tax credit spurred sales earlier in the year. The National Association of Realtors on January 5 may report that pending sales of existing homes fell 3 per cent in November after rising 3.7 per cent the prior month, according to the survey median.
Spending on construction projects, due from the Commerce Department tomorrow, may have dropped 0.5 per cent in November after no change the month before, the survey showed.