By Timothy R. Homan
Nov. 6 (Bloomberg) -- U.S. employers probably cut the fewest jobs in October in more than a year as the economic recovery eased the worst labor-market slump since the 1930s, economists said before a report today.
Payrolls fell by 175,000 workers, the smallest drop since August 2008, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate may have climbed to a 26-year high of 9.9 percent, the survey also showed.
Companies such as Deere & Co. are starting to recall staff after the world’s largest economy expanded last quarter at the fastest pace in two years, while Johnson & Johnson is among those cutting back further. Mounting unemployment is one reason Federal Reserve policy makers this week reiterated a pledge to keep their key interest rate low for an “extended period.”
“Employers remain cautious,” said Chris Low, chief economist at FTN Financial in New York. “As a result, employers are unlikely to start expanding their employee base any time soon, but are also unlikely to continue rapid layoffs.”
The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 105,000 to 250,000.
The October projection would bring total jobs lost since the recession began in December 2007 to 7.4 million, the biggest decline of any economic slump since the Great Depression. Monthly losses accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and peaked at 741,000 in January.
Temporary Help
Neal Soss, chief economist at Credit Suisse in New York, is among those saying today’s report may show an increase in hiring of temporary workers, which will be a harbinger of gains in overall employment. Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.
Economists surveyed by Bloomberg last month projected the jobless rate will exceed 10 percent by early 2010 and average 9.9 percent for all of next year even as the economy expands 2.4 percent.
Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the jobless rate is “the dominant variable driving changes in the fed funds” rate, and the central bank “has never raised rates with unemployment rising.”
Voter Discontent
Voters in Virginia and New Jersey this week took out their frustration over joblessness on the political party in charge. The economy and jobs were the most important issues as Republicans won governorships in both states held by Democrats, according to election polls.
President Barack Obama in February signed into law a $787 billion stimulus package aimed at reviving growth and stemming job losses. The administration said last week that the plan was directly responsible for saving or creating about 640,000 jobs. Exit polling this week showed six in 10 New Jersey voters and 55 percent of Virginians said Obama didn’t influence their vote.
The U.S. economy grew last quarter for the first time in a year, expanding at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.
Job Cuts
Some companies are cutting payrolls amid concern spending will cool as government assistance wanes. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health- products company, said Nov. 3 it will shrink its workforce by as much as 7 percent, or 7,000 workers.
Other companies are gaining confidence. Deere, the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.
Cisco Systems Inc.’s John Chambers, one of the first technology leaders to herald the recession two years ago, said yesterday he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter.
“The numbers are indicating us being in the early, initial phase of a recovery -- with the U.S. leading the way,” Chambers said in an interview.
After reaching a 13-year low on March 9, the Standard & Poor’s 500 Index has gained 58 percent as the economy showed signs of recovering.
Bloomberg Survey
===============================================================
Nonfarm Unemploy Manu Hourly
Payrolls Rate Payrolls Earnings
,000’s % ,000’s MOM%
===============================================================
Date of Release 11/06 11/06 11/06 11/06
Observation Period Oct. Oct. Oct. Oct.
---------------------------------------------------------------
Median -175 9.9% -42 0.1%
Average -175 9.9% -43 0.1%
High Forecast -105 10.1% -30 0.3%
Low Forecast -250 9.8% -55 0.0%
Number of Participants 84 81 22 60
Previous -263 9.8% -51 0.1%
---------------------------------------------------------------
4CAST Ltd. -145 9.9% --- 0.2%
Action Economics -150 9.9% -50 0.2%
AIG Investments -150 9.8% --- 0.2%
Aletti Gestielle SGR -160 9.9% -50 ---
Ameriprise Financial Inc -170 9.8% -35 0.1%
Banesto -175 --- --- ---
Bank of Tokyo- Mitsubishi -185 9.8% --- 0.2%
Bantleon Bank AG -190 9.9% --- ---
Barclays Capital -150 9.9% -30 0.1%
Bayerische Landesbank -180 9.9% --- ---
BBVA -185 9.9% -48 0.1%
BMO Capital Markets -170 10.0% --- 0.1%
BNP Paribas -200 10.1% --- 0.1%
BofA Merrill Lynch Resear -180 10.0% --- 0.1%
Briefing.com -230 10.0% --- 0.0%
C I T I C Securities -210 9.9% --- ---
Calyon -175 9.9% --- 0.1%
Capital Economics -180 10.0% --- 0.0%
CIBC World Markets -200 9.9% --- 0.1%
Citi -175 10.0% -45 0.1%
ClearView Economics -150 9.9% -35 0.2%
Commerzbank AG -175 9.9% --- 0.1%
Credit Suisse -150 9.9% --- 0.3%
Daiwa Securities America -150 9.9% --- ---
Danske Bank -120 9.9% --- ---
DekaBank -160 9.9% --- 0.1%
Desjardins Group -200 9.9% --- 0.1%
Deutsche Bank Securities -175 9.9% --- 0.1%
Deutsche Postbank AG -180 9.9% --- ---
DZ Bank -160 9.9% --- ---
Exane -150 10.0% --- 0.1%
First Trust Advisors -105 9.9% -40 0.2%
Fortis -160 9.9% --- ---
FTN Financial -175 9.9% --- 0.1%
GAIN Capital -190 10.0% --- ---
Goldman, Sachs & Co. -200 9.9% --- 0.1%
Helaba -200 9.8% --- 0.1%
Herrmann Forecasting -146 10.0% -43 0.2%
High Frequency Economics -175 9.9% --- 0.1%
HSBC Markets -175 9.9% --- 0.1%
Ibersecurities -130 --- --- 0.1%
IDEAglobal -150 9.9% -35 0.1%
IHS Global Insight -190 9.9% --- 0.1%
Informa Global Markets -200 9.9% -40 0.2%
ING Financial Markets -250 10.0% -55 0.1%
Insight Economics -175 10.0% --- 0.1%
Intesa-SanPaulo -170 9.9% --- 0.1%
J.P. Morgan Chase -140 10.0% -30 0.1%
Janney Montgomery Scott L -160 9.8% --- ---
Jefferies & Co. -167 9.9% -40 0.2%
Landesbank Berlin -220 10.0% --- 0.0%
Landesbank BW -160 9.8% --- ---
Maria Fiorini Ramirez Inc -180 9.9% --- 0.1%
MFC Global Investment Man -160 9.9% -40 0.1%
Mizuho Securities -225 9.9% --- ---
Moody’s Economy.com -175 10.0% -50 0.1%
Morgan Keegan & Co. -163 --- --- ---
Morgan Stanley & Co. -150 9.9% --- 0.1%
National Bank Financial -110 9.9% --- ---
Natixis -180 9.9% --- 0.1%
Newedge -200 9.9% -40 ---
Nomura Securities Intl. -185 9.9% --- 0.1%
Nord/LB -200 9.9% -55 0.1%
PNC Bank -190 10.0% -35 0.1%
Prestige Economics -190 10.0% --- ---
RBC Capital Markets -185 9.9% --- ---
RBS Securities Inc. -135 9.9% --- 0.1%
Ried, Thunberg & Co. -200 9.9% --- ---
Schneider Foreign Exchang -205 9.9% --- 0.1%
Scotia Capital -210 9.9% --- 0.1%
Societe Generale -175 9.9% --- 0.1%
Standard Chartered -150 9.9% -46 0.1%
Stone & McCarthy Research -150 9.9% -50 0.3%
TD Securities -175 10.0% --- ---
Thomson Reuters/IFR -190 9.9% --- 0.1%
Tullett Prebon -185 10.0% --- 0.1%
UBS -150 9.9% --- 0.2%
UniCredit Research -190 10.1% --- ---
University of Maryland -180 9.9% -45 0.1%
Wells Fargo & Co. -208 9.9% --- ---
WestLB AG -170 9.9% --- 0.1%
Westpac Banking Co. -150 10.0% --- ---
Woodley Park Research -221 9.8% --- 0.1%
Wrightson Associates -200 9.9% --- 0.1%
===============================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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