Payrolls Probably Fell, Factories Shrank: U.S. Economy Preview

By Shobhana Chandra

Sept. 28 (Bloomberg) -- The U.S. probably lost jobs in September for the ninth consecutive month and manufacturing shrank as the credit crisis intensified, economists said before reports this week.

Payrolls probably fell by 105,000, according to the median estimate in a Bloomberg News survey ahead of Labor Department figures on Oct. 3. A report from a private group may show factories stagnated this month as demand softened.

The worst financial-markets meltdown since the Great Depression is dealing another blow to an economy reeling from mounting job losses, a housing slump in its third year and a pullback in consumer spending. Weakening growth overseas will limit demand for U.S.-made goods, further hurting manufacturing.

``Things are definitely looking worse,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. The credit crisis ``will magnify the degree of the economic downturn. The labor market is weak, and manufacturing is going to slow as some of our trading partners are in a recession like the U.S.''

The employment report may show the jobless rate stayed at a five-year high of 6.1 percent this month, according to the Bloomberg survey. Factory payrolls probably fell by 50,000.

Factory Index

The Institute for Supply Management's factory index probably slid to 49.5, from 49.9 in August, the survey median shows. The Tempe, Arizona-based group's index for service industries, which make up almost 90 percent of the economy, declined to 50 from 50.6 the prior month, economists forecast.

An index reading of 50 is the dividing line between expansion and contraction for ISM's manufacturing report, due on Oct. 1, and for its services report, due two days later.

Companies will get less support from overseas demand in coming months. Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, and Japan's economy shrank in the same period.

U.S. businesses also are limiting spending on new equipment. Factory orders fell in August for the first time in six months, economists in the Bloomberg survey predict ahead of Commerce Department figures due on Oct. 2.

Another Commerce report on Sept. 29 may show automakers' incentives helped to lift personal spending by 0.2 percent in August, according to the median forecast of economists. Still, Americans remain under pressure, and consumer spending may stagnate this quarter, the worst performance since 1991, according to a Bloomberg survey in early September.

Unemployment

The weakening labor market is holding down spending. The projected drop in September payrolls would follow 84,000 reductions in August that brought the total job cuts for the first eight months to 605,000. In 2007, the economy generated 91,000 jobs a month on average.

In the past week, Chrysler LLC said it will fire about 250 employees as part of a plan to eliminate 1,000 salaried positions by Sept. 30, and UAL Corp.'s United Airlines said 1,550 flight attendants volunteered for leaves, eliminating the need for forced layoffs.

The U.S. Postal Service, which has said it may lose $2 billion this year, on Sept. 23 announced it is imposing a hiring and promotions freeze, effective immediately.

Payroll declines in September may be bigger in part because Hurricanes Gustav and Ike threw thousands out of work, economists said. More layoffs may occur following a bankruptcy filing by New York-based Lehman Brothers Holdings Inc. and the government takeover of Fannie Mae and Freddie Mac.

The New York metropolitan area is forecast to lose 64,000 positions by the second quarter of 2010, according to West Chester, Pennsylvania-based Moody's Economy.com.

``I believe that if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover,'' Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee on Sept. 23.

The Bush administration is working with Congress on a rescue plan for troubled banks to prevent growth from stalling.

Bloomberg Survey

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                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
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Pers Inc MOM%             9/29      Aug.     -0.7%      0.2%
Pers Spend MOM%           9/29      Aug.      0.2%      0.2%
PCE Deflator YOY%         9/29      Aug.      4.5%      4.5%
Core PCE Prices MOM%      9/29      Aug.      0.3%      0.2%
Core PCE Prices YOY%      9/29      Aug.      2.4%      2.4%
Case Shiller Monthly YO   9/30      July     -15.9%    -16.0%
Case Shiller Monthly In   9/30      July     167.7     166.9
Chicago PM Index          9/30     Sept.      57.9      53.0
Consumer Conf Index       9/30     Sept.      56.9      55.0
NAPM Milwaukee Index      9/30     Sept.      43.0      44.0
ABC Conf Index            9/30    Sept. 29    -41       -43
ADP Payroll ,000's        10/1     Sept.      -33       -53
ISM Manu Index            10/1     Sept.      49.9      49.5
ISM Prices Index          10/1     Sept.      77.0      73.0
Construct Spending MOM%   10/1      Aug.     -0.6%     -0.5%
Vehicle Sales Mlns        10/1     Sept.      13.7      13.5
Domestic Vehicles Mlns    10/1     Sept.      10.4      10.1
Initial Claims ,000's     10/2    Sept. 20    493       475
Cont. Claims ,000's       10/2    Sept. 13    3542      3550
Factory Orders MOM%       10/2      Jan.      1.3%     -2.8%
Nonfarm Payrolls ,000's   10/3     Sept.      -84       -105
Unemploy Rate %           10/3     Sept.      6.1%      6.1%
Manu Payrolls ,000's      10/3     Sept.      -61       -50
Hourly Earnings MOM%      10/3     Sept.      0.4%      0.3%
Hourly Earnings YOY%      10/3     Sept.      3.6%      3.6%
Avg Weekly Hours          10/3     Sept.      33.7      33.7
ISM NonManu Index         10/3     Sept.      50.6      50.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net