BLBG: Payroll Gains in U.S. on Track for Best Year Since 2005
Job growth in November was probably strong enough to keep payroll gains on track for the best year since 2005, economists said before a report today.
Employers added 185,000 workers last month after taking on 204,000 in October, based on the median forecast of 89 economists in a Bloomberg survey before today’s report from the Labor Department. The unemployment rate dropped to 7.2 percent, matching an almost five-year low, from 7.3 percent as federal employees returned to work, according to the survey median.
The pickup in employment over the last three months signals companies are confident that demand will improve and gives American workers the means to spend. The data also underscore the view of Federal Reserve policy makers that labor conditions are brightening as they consider when to scale back record monetary stimulus.
“It’s sort of uncanny how steady the growth has been,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “The improvement in the job market is sufficient over time that an extraordinary amount of quantitative easing -- $85 billion a month, almost $1 trillion a year -- isn’t going to be necessary as we go through 2014.”
The economy has added more than 186,000 jobs a month on average so far in 2013 compared with 182,750 in 2012. Average payroll growth this year would be the strongest since 207,000 in 2005.
The Labor Department figures will be released at 8:30 a.m. in Washington. Bloomberg survey estimates for payrolls ranged from increases of 115,000 to 230,000.
Forecasts for the unemployment rate, derived from a separate Labor Department survey of households, range from 7 percent to 7.5 percent. In October, joblessness rose for the first time in five months, reflecting workers furloughed during a federal government shutdown that lasted for 16 days.
Private Hiring
Private hiring, which excludes government agencies, increased 180,000 in November after a 212,000 advance the prior month, according to the Bloomberg survey median.
Faster progress in the labor market could hasten the Fed’s decision to taper its current round of easing that began last year. At that time, more stimulus was needed to shore up the economy and speed America’s return to full employment. The central bank will slow its purchases after its March meeting, according to the median estimate in a Bloomberg survey of 32 economists taken last month.
“A stronger-than-expected nonfarm payroll report could prove pivotal for market expectations, helping to bring the odds of a January announcement closer to even,” Gennadiy Goldberg, U.S. strategist at TD Securities in New York, wrote in a Dec. 2 note to clients.
Beige Book
The Fed said in its latest Beige Book business survey, released this week, that gains in manufacturing, technology and housing fueled “modest to moderate” economic growth from early October through mid-November.
“Hiring showed a modest increase or was unchanged,” the central bank said in its survey, which contains anecdotal reports from the 12 Fed district banks two weeks before the officials meet to set monetary policy.
Among companies adding positions is Cognizant Technology Solutions Corp., one of the largest providers of outsourcing services. Teaneck, New Jersey-based Cognizant plans to add about 10,000 U.S. workers, expanding its 29,000-employee domestic workforce over the next three years, President Gordon Coburn said in a speech in Texas this week.
“The stabilization of the economy in the U.S. has given our clients more comfort in innovation and investing in growing their own top line,” Coburn said in an interview.
Factory Jobs
Manufacturing payrolls are projected to increase for a fourth month, according to the Bloomberg survey.
The Institute for Supply Management’s factory index, released Dec. 2, showed manufacturing expanded in November at the fastest since April 2011. The figures showed factory employment expanded the most since April 2012, a sign companies were growing more optimistic about the economic outlook.
While factories are adding workers, an increase in borrowing costs since May is causing some financial firms to pare staff as fewer Americans refinance mortgages.
A net 15,282 mortgage-related jobs were lost in the third quarter, the worst since 2007, according to the Mortgage Daily’s Mortgage Employment Index.
“Rising rates dragged down refinance activity and eliminated the need for production employees,” according to Sam Garcia, publisher for Mortgage Daily, an online industry news publication.
Consumer Spending
More jobs, rising stock prices and an improvement in home prices are giving consumers the wherewithal to boost spending, which makes up about 70 percent of the economy.
Households continue to purchase big-ticket items such as automobiles. Cars and light trucks sold at a 16.3 million annualized rate in November, the fastest pace since 2007, according to figures yesterday from Ward’s Automotive Group.
Further job growth would help bolster consumer sentiment, which has faltered since the middle of the year. The Thomson Reuters/University of Michigan sentiment indicator was at 75.1 in November compared with a six-year high of 85.1 in July.
