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July 29, 2007
Payrolls, wages and manufacturing in the U.S. expanded in July, pointing to an economy that is surviving a deepening slump in housing, economists project reports this week will show.
Employers added 130,000 workers to payrolls this month, about the same as in June, according to the median estimate of economists surveyed by Bloomberg News ahead of a Labor Department report Aug. 3. A private report Aug. 1 may show manufacturing grew at close to the fastest pace in more than a year.
More jobs and bigger paychecks will prevent consumer spending, which accounts for more than two-thirds of the economy, from slowing even more in the face of high fuel prices and falling home values. Improving foreign demand for American goods will help keep factories humming even as Americans cut back.
"Moderate job growth gives the consumer enough fuel for consumption to improve a bit,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``Modest demand and solid export growth will give you a moderate pace of manufacturing growth.''
The projected rise in hiring this month followed a 132,000 increase in June. The jobless rate held at 4.5 percent for a fourth month and wages were up 3.8 percent from July 2006, the Labor Department's unemployment report is also forecast to show. The jobless rate reached 4.4 percent in March and October, the lowest since 2001.
Gains in jobs and wages are all the more important now that near-record gasoline prices and falling home prices are taking a bite out of Americans' purchasing power. Consumer spending slowed to a 1.3 percent annual pace in the second quarter, down from 3.7 percent the previous three months.
Less Spending
The quarter probably ended on a bad note. Spending in June rose 0.1 percent, the smallest gain since September, following a 0.5 percent increase the previous month, according to the median survey forecast ahead of a Commerce Department report July 31.
Auto dealers are among those experiencing the brunt of the slowdown. Sales in June were the lowest in almost two years, according to industry figures.
"There is a direct link between housing and the distress it creates for the consumer around big-ticket items,'' said Michael Jackson, chief executive officer of AutoNation Inc., in an interview July 26 from Fort Lauderdale, Florida.
Manufacturing remains a bright spot as faster growth in Asian and European economies is keeping American factories churning out goods. A need to rebuild depleted inventories will also contribute to the industrial rebound, economists said.
Manufacturing Index
The Tempe, Arizona-based Institute for Supply Management's factory index for July slipped to 55.5 from 56 in June, a 14- month high, according to the survey median. Readings greater than 50 signal expansion. The gauge averaged 53.9 in 2006.
The ISM's index of non-manufacturing businesses, due Aug. 3, eased to 59 for July from 60.7 the previous month, which was also a 14-month high, according to the survey median.
Finally, orders to factories probably rose 1 percent in June following a 0.5 percent decrease a month earlier, economists project a Commerce Department report on Aug. 2 will show. The gain was probably paced by a jump in bookings for commercial aircraft, economists said.
"We continue to believe that capital spending is likely to be stronger in the second half than in the first,'' said Ethan Harris, chief economist at Lehman Brothers Holdings Inc. in New York.
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
07/31 8:30 2Q Employment Cost Index 0.9% 0.8%
07/31 8:30 June Personal Income 0.5% 0.4%
07/31 8:30 June Personal Spending 0.1% 0.5%
07/31 10:00 July Chicago Purchasers 58.4 60.2
07/31 10:00 July Confidence-Conf. Board 105.0 103.9
07/31 10:00 June Construction Spending 0.2% 0.9%
08/01 10:00 June Home Resales Pending -0.5% -3.5%
08/01 10:00 July ISM Manufacturing 55.5 56.0
08/01 10:00 July ISM Prices 66.5 68.0
08/02 8:30 7/21 Continuing Claims 2540K 2545K
08/02 8:30 7/28 Initial Jobless Claims 310K 301K
08/02 10:00 June Factory Orders 1.0% -0.5%
08/03 8:30 July Avg. Hourly Earnings 0.3% 0.3%
08/03 8:30 July Change Nonfarm Jobs 130K 132K
08/03 8:30 July Unemployment Rate 4.5% 4.5%
08/03 10:00 July ISM Non-Manufacturing 59.0 60.7
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