Payrolls Probably Fell for Seventh Month: U.S. Economy Preview

By Shobhana Chandra

July 27 (Bloomberg) -- The U.S. lost jobs in July for the seventh straight month, a sign the economy may weaken after tax rebates boosted growth in the second quarter, economists said before reports this week.

Payrolls probably shrank by 75,000, according to the median estimate in a Bloomberg News survey ahead of a Labor Department report on Aug. 1. The economy expanded at a 2.3 percent annual rate from April to June, more than twice the pace of the prior quarter, other figures may show.

Sustained job losses will take a toll on Americans already burdened by record gasoline costs, plunging home values, and shrinking access to credit. The weakening labor market reinforces concern consumer spending will falter once the cash from the tax rebates is used up.

``With the tax rebates, we essentially put our troubles off for another day,'' said Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York. ``The weakening employment market will definitely hurt the consumer's ability to spend.''

The employment report may also show the jobless rate rose to 5.6 percent in July, the highest level in four years, according to the Bloomberg survey median. Factory payrolls probably fell by 40,000, the report may show.

Last month's job cuts would follow a 62,000 reduction in June, bringing the total drop in payrolls so far this year to more than half a million. The three-year housing slump and prolonged credit crisis signal builders and financial firms will probably fire even more workers in coming months.

Automakers, Airlines

Surging energy costs also are prompting cuts at automakers and airlines. Chrysler LLC, the third-largest U.S.-based automaker, plans to shed an additional 1,000 salaried jobs after U.S. sales tumbled 22 percent in the first half of 2008. UAL Corp.'s United Airlines, the world's second-largest carrier, will cut 7,000 jobs after a second-quarter loss.

``Our industry is challenged as never before by the unrelenting price of oil,'' UAL's Chief Executive Officer Glenn Tilton said in a statement on July 22.

Rising unemployment is one reason last quarter's stimulus- driven rebound in growth will give way to weaker numbers by the end of the year. By June 27, the government had already distributed almost 80 percent of the more than $100 billion in tax rebates to be doled out under the plan, Treasury figures show.

As a result, consumer spending climbed at a 1.5 percent pace in the April to June period, picking up from 1.1 percent in the prior quarter, the survey median shows. The figures will be released as part of the Commerce Department's gross domestic product report on July 31.

Bernanke's View

The stimulus package ``does seem to be helping,'' Federal Reserve Chairman Ben S. Bernanke said this month in semiannual testimony to the Senate in Washington. Still, there are ``significant downside risks to the outlook for growth.''

A private report on Aug. 1 may show manufacturing cooled in July. The Institute for Supply Management's factory index slipped to 49.2 from 50.2 the prior month, according to the Bloomberg survey median. A reading of 50 is the dividing line between growth and contraction.

Other reports this week will probably provide more evidence housing remains in a slump. Home prices in 20 U.S. metropolitan areas probably fell in the 12 months ended May by the most on record, economists project a July 29 report from S&P/Case- Shiller will show.

Figures from the Commerce Department due Aug. 1 may show spending on construction projects dropped in June for the third consecutive month.

                         Bloomberg Survey

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                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
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Case Shiller Monthly YO   7/29      May      -15.3%    -16.0%
Case Shiller Monthly In   7/29      May      169.9     168.2
Consumer Conf Index       7/29      July      50.4      50.0
GDP Annual QOQ%           7/31      2Q A      1.0%      2.3%
Personal Consump. QOQ%    7/31      2Q A      1.1%      1.5%
GDP Prices QOQ%           7/31      2Q A      2.7%      2.3%
Core PCE Prices QOQ%      7/31      2Q A      2.3%      2.0%
Employ Costs QOQ%         7/31       2Q       0.7%      0.7%
Initial Claims ,000's     7/31     27-Jul     406       395
Cont. Claims ,000's       7/31     20-Jul     3107      3150
Chicago PM Index          7/31      July      49.6      49.0
Nonfarm Payrolls ,000's   8/1       July      -62       -75
Unemploy Rate %           8/1       July      5.5%      5.6%
Manu Payrolls ,000's      8/1       July      -33       -40
Hourly Earnings MOM%      8/1       July      0.3%      0.3%
Hourly Earnings YOY%      8/1       July      3.4%      3.4%
Avg Weekly Hours          8/1       July      33.7      33.7
ISM Manu Index            8/1       July      50.2      49.2
ISM Prices Index          8/1       July      91.5      88.0
Construct Spending MOM%   8/1       June     -0.4%     -0.3%
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net