By Alex Kowalski and Lorraine Woellert - Jul 6, 2012 3:09 AM GMT+0700
Fewer Americans filed first-time claims for unemployment insurance payments and companies added more workers than forecast, easing concern the labor market is faltering further.
Job seekers attend the Veterans Affairs Job Fair in Detroit. Photographer: Jeff Kowalsky/Bloomberg
July 5 (Bloomberg) -- Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week. Applications for jobless benefits decreased by 14,000 in the week ended June 30 to 374,000, the fewest since mid May, Labor Department figures showed today. Michael McKee and Betty Liu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
July 5 (Bloomberg) -- Timothy Bitsberger, a managing director at BNP Paribas and a former assistant secretary for financial markets at the U.S. Treasury, talks about the U.S. economy and Federal Reserve monetary policy. Bitsberger, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses the European Central Bank's rate-cut decision today and the region's debt crisis. (Source: Bloomberg)
July 5 (Bloomberg) -- George "Gus" Sauter, chief investment officer at Vanguard Group Inc., and Scott Shellady, senior vice president at Trean Group, talk about the outlook for tomorrow's June U.S. employment report and its potential impact on Federal Reserve policy and market sentiment. They speak with Scarlet Fu and Dominic Chu on Bloomberg Television's "Lunch Money." (Source: Bloomberg)
July 5 (Bloomberg) -- Maury Harris, chief economist at UBS Securities LLC in New York, talks about the global economic outlook and the role of central bank monetary policy, including China's latest cut in benchmark interest rates. Harris, speaking with Tom Keene, Sara Eisen and Ken Prewitt on Bloomberg Television's "Surveillance," also discusses the U.S. labor market. (Source: Bloomberg)
Applicants wait to enter a job fair in New York, on June 11, 2012. Photographer: John Moore/Getty Images
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Applications for jobless benefits fell 14,000 in the week ended June 30 to 374,000, Labor Department figures showed today. Private employers expanded payrolls by 176,000 last month, according to figures released today by Roseland, New Jersey- based ADP Employer Services, exceeding the most optimistic estimate in a Bloomberg News survey of economists.
“Before today it was pretty clear the labor market had softened over the past few months,” said Daniel Silver, an economist at JPMorgan Chase & Co. in New York. “Today’s reports show a little bright spot. The fear of a much weaker payroll number has been reduced.”
Labor Department data tomorrow may show the pace of hiring accelerated in June while remaining at less than half the average for the first quarter of the year. The report covers both private and government employers. Other figures today showed service industries expanded at a slower pace in June, underscoring Federal Reserve concern that economic growth isn’t strong enough to reduce unemployment.
U.S. stocks fell, snapping a three-day advance for the Standard & Poor’s 500 Index, as disappointment over the European Central Bank’s efforts to tame the debt crisis overshadowed improving American employment data.
The S&P 500 declined 0.5 percent to 1,367.58 at the 4 p.m. close in New York. Treasuries gained, pushing the yield on the 10-year note down to 1.60 percent from 1.63 percent late on July 3.
Central Banks
The ECB today cut its benchmark interest rates to a record low, joining counterparts in the U.K. and China in taking action against a global economic slowdown. The ECB lowered the benchmark and deposit rates by 25 basis points to 0.75 percent and zero respectively.
ECB President Mario Draghi said the cuts may have only a limited impact on the euro-area economy as it slides toward recession.
“It’s clear that when demand is weak the transmission of price signals to the aggregated economy is muted,” Draghi said at a press conference in Frankfurt.
The Bank of England began today’s stimulus push, announcing it would restart buying bonds two months after stopping. The People’s Bank of China cut its key interest rate for the second time in a month and allowed banks to offer bigger discounts on their own lending costs.
Global Growth
Slowing global growth is curbing demand for U.S. exports and rippling through the rest of the economy, limiting sales at companies from Family Dollar (FDO) Stores Inc. to FedEx Corp. and restraining hiring.
The Institute for Supply Management said its non- manufacturing index dropped to 52.1, less than projected, from 53.7 in May, according to a report from the Tempe, Arizona-based group today. The median forecast of 70 economists surveyed by Bloomberg News called for 53. Readings above 50 signal expansion.
The report follows July 2 data that showed the ISM factory index fell to 49.7 in June, the first contraction in almost three years and worse than the most-pessimistic forecast in a Bloomberg survey.
Family Dollar, the owner of more than 7,200 discount shops in the U.S., narrowed its profit forecast for fiscal 2012 after third-quarter sales trailed analysts’ average estimate.
‘Economic Headwinds’
“It is clear that consumers continue to face difficult economic headwinds,” Chief Executive Officer Howard Levine said on a June 28 conference call with analysts. Discretionary purchases like home goods and apparel continue to be “challenged,” he said.
Demand remains soft, according to FedEx, which is considered an economic bellwether because it carries everything from mobile devices to pharmaceuticals. The Memphis, Tennessee- based company, operator of the world’s largest cargo airline, pledged “significant cost reductions” as slowing economic growth pressures profits.
“We now realize we’ve got to adjust the networks that we built for higher gross domestic product growth than we’re actually seeing,” Chief Financial Officer Alan Graf said on an earnings call last month.
Fewer firings help pave the way for faster job creation when companies grow more confident about the economic outlook. Tomorrow’s Labor Department report may show employers added 100,000 jobs in June, up from 69,000 the prior month that was the least in a year. The unemployment rate is forecast to be unchanged at 8.2 percent.
Goldman Estimate
Economists at Goldman Sachs Group Inc. raised their forecast for June payrolls growth to 125,000 from 75,000, citing data including today’s ADP figures and jobless claims.
Retailers’ June same-store sales about matched analysts’ estimates, with luxury chains such as Saks Inc. and discounters like TJX Cos. topping expectations and stores targeting middle- income consumers trailing projections, according to another report today.
Same-store sales at the more than 20 companies tracked by Retail Metrics Inc. rose 0.3 percent, compared with the 1 percent average estimate of analysts surveyed by the research firm. The results follow a 7.2 percent increase last year.
Slower job growth and unemployment that’s exceeded 8 percent for 40 straight months are damping sentiment. Consumer confidence dropped last week from a two-month high as fewer Americans considered it a good time to spend and their views of the economy languished.
Consumer Confidence
The Bloomberg Consumer Comfort Index decreased to minus 37.5 in the week ended July 1 from minus 36.1 in the previous period. Even with the drop, the measure averaged minus 37.6 in the second quarter, the best showing since the first three months of 2008, helped in part by lower gasoline prices.
Jobless claims were forecast at 385,000, according to the median estimate in a Bloomberg News survey of 46 economists. Projections ranged from 371,000 to 400,000. The Labor Department revised the prior week’s figure to 388,000 from an initially reported 386,000.
“Claims offer some encouragement on the labor market front,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York, who forecast a drop in jobless applications. “I would caution by saying this series is notoriously volatile. We would hope this is sustained for the coming months.”
To contact the reporters on this story: Alexander Kowalski in Washington at akowalski13@bloomberg.net; Lorraine Woellert in Washington at lwoellert@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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