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December 7, 2007
Employers in the U.S. hired less than half as many workers in November and the unemployment rate rose to a 16-month high as a slowing economy prompted businesses to cut back, economists said before a report today.
Payrolls rose by 80,000 following a gain of 166,000 in October, based on the median forecast in a Bloomberg News survey of 82 economists before the Labor Department report. The jobless rate probably rose to 4.8 percent from 4.7 percent.
Federal Reserve Chairman Ben S. Bernanke and his colleagues are counting on wage gains to help consumers weather declining home and stock prices, rising energy costs and stricter lending guidelines. A deeper hiring slump would raise the odds central bankers will keep lowering interest rates into 2008.
"The economy may be dancing at the edge of the ice,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland. The employment slowdown "is not so dire as to warrant aggressive Fed action, but it's certainly a concern.''
The report is due at 8:30 a.m. in Washington. Payroll forecasts ranged from a decline of 5,000 to a gain of 195,000. An average 125,000 jobs a month have been created this year, down from 189,000 in 2006.
Estimates for the jobless rate ranged from 4.7 percent to 4.8 percent. The rate has been rising since reaching a five-year low of 4.4 percent in March.
Also today, a preliminary estimate from Reuters/University of Michigan may show consumer sentiment fell to a two-year low in December. The report is due at 10:00 a.m. Washington time.
Policy 'Linchpin'
The jobs report will be "a linchpin'' in the Fed's rate deliberations on Dec. 11, said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. It would probably take a loss of jobs and a larger-than-forecast increase in the unemployment rate for the Fed to cut by a half percentage point next week, he said.
Federal funds futures show traders see a 100 percent chance of a reduction in the benchmark rate next week, with a 34 percent probability of a half-point move as of late yesterday. The Fed has cut the target rate by 0.75 percentage point over the previous two meetings.
The odds of more aggressive action had been better-than- even until a private report earlier this week suggested economists may be underestimating the job market's resilience.
Companies hired 189,000 additional workers in November, according to data compiled by ADP Employer Services. The figures include only private employment and don't take into account hiring by government agencies.
No Bad News
"Fortunately, we haven't seen the kind of bad news we've seen everywhere else in the economy,'' Harvard University economist Martin Feldstein said in an interview Dec. 5. "Employment so far has been holding up. It's not gangbusters, but it's holding up reasonably well.''
So far, income gains have kept consumer spending, which accounts for more than two-thirds of the economy, from faltering.
"Continued good performance by the labor market is important for maintaining the economic expansion, as growth in earnings helps to underpin household spending,'' Bernanke said in a Nov. 29 speech in Charlotte, North Carolina. A day before, Vice Chairman Donald Kohn said the job market was an important "pillar'' for the economy.
Consumers face "headwinds'' from reduced access to credit, higher gasoline prices and falling home values, the Fed chief said last week. The number of Americans who fell behind on their mortgage payments rose to a 20-year high in the third quarter as borrowers were unable to refinance or sell their homes, a report yesterday from the Mortgage Bankers Association showed.
Spending Stalled
Consumer spending stalled in October after adjusting for inflation, the weakest performance in seven months, according to figures from the Commerce Department.
General Motors Corp. and Ford Motor Co., bracing for sales declines to continue into 2008, said this week they'll trim production in the first quarter.
Lending restrictions, the housing slump and surging fuel costs have also become a hurdle for businesses. Economists said factories, homebuilders and mortgage lenders continued to shed workers in November.
Factories probably cut 15,000 workers from payrolls, based on the Bloomberg survey median. Manufacturing employment has shrunk by 17,000 a month on average this year, while construction companies have reduced staff by about 8,300 a month.
Midland, Michigan-based Dow Chemical Co., the largest U.S. chemical maker, said on Dec. 4 that it will shut a number of plants around the world to cut costs, eliminating about 1,000 jobs. The closures include automotive sealant units in North America, Dow said.
Revisions issued by the Commerce Department last week showed wages rose less than previously estimated during the second quarter. The adjustment suggests fewer jobs were created than previously estimated, income gains were smaller, or a combination of both, economists said.
Today's Labor Department report will probably show hourly wages rose 3.8 percent last month from November 2006, according to the median estimate of economists surveyed by Bloomberg News. That matched the 12-month gain reported for October.
Bloomberg Survey
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Nonfarm Jobless Mich
Payrolls Rate Conf.
,000's % Index
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Date of Release 12/07 12/07 12/07
Observation Period Nov. Nov. Dec. P
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Median 80 4.8% 75.0
Average 82 4.8% 74.8
High Forecast 195 4.9% 77.5
Low Forecast -5 4.7% 70.0
Number of Participants 82 78 63
Previous 166 4.7% 76.1
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4CAST Ltd. 100 4.8% 73.5
Action Economics 90 4.8% 76.0
AIG Investments 65 4.7% 76.0
Aletti Gestielle SGR 90 4.8% 71.0
Allianz Dresdner Economic 60 4.8% ---
Argus Research Corp. -5 4.7% 75.5
Banc of America Securitie 75 4.8% ---
Bancolombia SA 60 --- ---
Banesto 80 --- 75.5
Bank of Tokyo- Mitsubishi 137 4.8% 76.6
Bantleon Bank AG 60 4.7% ---
Barclays Capital 80 4.8% 75.0
BBVA 105 --- 74.0
Bear, Stearns & Co. 120 4.7% ---
BMO Capital Markets 50 4.8% 75.0
BNP Paribas 130 4.8% 72.0
Briefing.com 110 4.8% 76.0
Calyon 125 4.7% 75.0
CEMEX 100 4.7% 75.0
CFC Group 10 4.8% 74.0
CIBC World Markets 60 4.8% ---
Citi 125 4.8% 76.0
ClearView Economics 110 4.8% ---
Commerzbank AG 50 4.7% 75.0
Credit Suisse 50 4.8% 74.0
Daiwa Securities America 80 4.8% 74.0
Danske Bank 105 4.8% 75.0
DekaBank 85 4.8% 74.5
Desjardins Group 99 4.8% 74.9
Deutsche Bank Securities 125 4.7% 74.0
Deutsche Postbank AG 80 4.8% 75.0
Dresdner Kleinwort 75 4.8% 74.0
DZ Bank 50 4.8% 74.0
First Trust Advisors 57 4.8% 76.0
Fortis 90 4.8% 75.0
FTN Financial 50 4.7% 74.0
Global Insight Inc. 100 4.8% 73.0
Goldman, Sachs & Co. 100 4.8% ---
H&R Block Financial Advis 60 4.8% 75.5
Helaba 85 4.8% 77.0
High Frequency Economics 125 4.8% 73.0
Horizon Investments 60 4.8% ---
HSBC Markets 100 4.8% 75.0
IDEAglobal 115 4.8% 75.5
Informa Global Markets 65 4.7% ---
ING Financial Markets 30 4.8% 73.0
Insight Economics 75 4.8% 75.0
Intesa-SanPaulo 70 4.8% 75.0
J.P. Morgan Chase 60 4.7% 75.0
Janney Montgomery Scott L 195 4.8% ---
JPMorgan Private Client 65 4.7% 75.8
Landesbank Berlin 70 4.8% 72.8
Landesbank BW 90 4.8% 75.0
Lehman Brothers 125 4.7% 75.0
Lloyds TSB 90 4.8% 76.0
Maria Fiorini Ramirez Inc 120 4.8% ---
Merrill Lynch 50 4.8% 70.0
Mizuho Securities 50 4.9% 74.0
Moody's Economy.com 75 4.8% 77.0
Morgan Stanley & Co. 100 4.8% ---
National Bank Financial 60 --- 74.0
National City Bank 115 4.7% 77.5
Natixis 60 4.8% ---
Nomura Securities Intl. 60 4.8% ---
Nord/LB 90 4.8% 77.0
PNC Bank 65 4.8% ---
RBS Greenwich Capital 90 4.8% 75.0
Ried, Thunberg & Co. 130 4.8% 75.0
Scotia Capital 90 4.8% 70.0
Societe Generale 85 4.7% 75.0
Standard Chartered 90 4.7% ---
Stone & McCarthy Research 80 4.8% 75.7
TD Securities 70 4.8% ---
Thomson Financial/IFR 65 4.8% 77.0
UBS Securities LLC 25 4.8% 76.0
Unicredit MIB 50 4.8% 75.0
University of Maryland 88 4.8% 73.5
Wachovia Corp. 90 4.8% ---
Wells Fargo & Co. 55 4.8% 76.0
WestLB AG 70 4.8% 75.8
Westpac Banking Co. 110 4.7% 74.5
Wrightson Associates 140 4.8% 76.0
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