BLBG: Payrolls Probably Rose in May to Surpass U.S. Pre-Recession Peak
Employers in the U.S. probably added more than 200,000 workers for a fourth month in May, powering payrolls past the pre-recession peak for the first time as the economic expansion continues to strengthen.
Payrolls increased by 215,000 following a 288,000 gain in April, according to the median forecast of 92 economists in a Bloomberg survey. The unemployment rate rose to 6.4 percent from an almost six-year low of 6.3 percent, economists projected.
Improving business confidence as sales grow and the economy rebounds from its worst performance in three years will probably mean headcounts will continue to climb. Rising employment gives Federal Reserve policy makers reason to keep paring record monetary stimulus.
“We expect the positive momentum in labor-market activity to persist,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, said in a research note. “The performance in the labor market will reflect the continued pickup in domestic economic growth momentum, which should lift job growth to an above-200,000 pace on a more sustained basis.”
Payroll estimates in the Bloomberg survey before the Labor Department’s report at 8:30 a.m. in Washington ranged from increases of 110,000 to 350,000. May would mark the fourth straight month payrolls have increased at least 200,000, the first time that’s happened since September 1999 to January 2000.
The projected May gain would take total employment past its peak of 138.4 million reached in January 2008, one month after the start of the deepest recession in the post-World War II era. The number of employees on payrolls stood at 138.3 million in April.
‘Painfully Slow’
“It’s taken an extremely long period of time to gain back all of those jobs, much longer than any other cycle,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC. “ It really drives home how painfully slow the process has been.”
Payrolls excluding government agencies reached 116.1 million in March to surpass the pre-recession peak. Private hiring probably increased by 210,000 in May after a 273,000 advance the month before, economists projected. Factory (USMMMNCH) payrolls increased by 10,000 following a 12,000 gain in April, according to the Bloomberg survey.
Economists surveyed by Bloomberg from May 2 to 7 project the economy will add 225,000 jobs a month on average this year, up from 194,250 in 2013 and 186,330 the previous year.
Wages Lag
While the economy is creating more jobs, wage growth has lagged behind. Slower pay gains corroborate Fed Chair Janet Yellen’s view that a “substantial amount of slack” remains in the labor market. What’s more, limited income growth stands in the way of faster consumer spending.
“While conditions in the labor market have improved appreciably, they are still far from satisfactory,” Yellen told the congressional Joint Economic Committee on May 7.
Gross domestic product fell at a 1 percent annualized rate in the first quarter, the weakest reading since the same three months in 2011, the Commerce Department said last week.
Household purchases unexpectedly fell 0.1 percent in April, the first decrease in a year, after a 1 percent gain the prior month that was the strongest since August 2009, according to the Commerce Department. After adjusting the figure for inflation, spending dropped by the most since September 2009. Wages and salaries grew the least this year.
“It’s a little bit of a vicious circle,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “That prevents us from breaking out of that circle and moving to a higher growth path.”
Fed’s Survey
The Fed said this week in its Beige Book business survey that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. The survey, released two weeks before policy makers meet in Washington, supports Yellen’s view that the first-quarter slowdown was largely due to harsh winter weather.
Fed officials are watching the labor market as they get closer to completing their bond-purchase program later this year and start considering the timing of the first interest-rate increase since 2006. The Fed’s Open Market Committee has pared its monthly asset-buying to $45 billion and said further reductions in measured steps are likely.
