US Economy Preview: Payrolls Likely Rose, Factories Expanded in March

Sunday, 31 Mar 2013 01:49 PM

 

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Payrolls probably grew in March and factories kept assembly lines moving, signaling the U.S. expansion chugged ahead even as federal spending cuts set in, economists said before reports this week.

Employers hired a net 200,000 workers this month after taking on 236,000 in February, according to the median forecast of 58 economists surveyed by Bloomberg before April 5 figures from the Labor Department. Another report may show manufacturing expanded at close to the fastest pace in almost two years.

The pickup in hiring, combined with a rebound in housing and record stock prices, is helping Americans weather an increase in the payroll tax, triggering gains in spending that are in turn promoting more employment. Factories are boosting production in response to improving sales and business investment, strengthening an economy facing automatic federal budget cuts.

“The U.S. economy is rebounding,” Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, said in a March 28 report. “The prospects for continued strong employment gains look good, even as the economy absorbs the fiscal drag.”

The jobless rate held at 7.7 percent this month, matching February’s reading as the lowest since December 2008, according the Bloomberg survey median.

A March payroll increase in line with the median forecast would make average job growth over the past six months the fastest in almost a year.

Fed’s View

Fed Chairman Ben S. Bernanke said the central bank wants to see further labor market progress before curbing record monetary easing. The Federal Open Market Committee decided on March 20 to keep buying bonds at a monthly pace of $85 billion and to leave the bank’s key interest rate near zero so long as unemployment remained above 6.5 percent and the outlook for inflation was less than 2.5 percent.

Fed officials, nonetheless, said they do see better signs.

“Obviously, there has been improvement,” Bernanke said at a news conference after the FOMC met. “One thing we would need is to make sure that this is not a temporary improvement.”

Helping keep the economy and employment growing, Americans have been able to cope with higher taxes and gasoline prices so far this year. Consumer spending climbed in February by the most in five months and confidence unexpectedly improved in March, reports showed last week.

Purchases, which account for about 70 percent of the economy, rose 0.7 percent after a 0.4 percent advance the prior month that was bigger than previously estimated, according to Commerce Department data. The Thomson Reuters/University of Michigan’s final March sentiment index rose to 78.6, exceeding all estimates in a Bloomberg survey, from 77.6 in February.

Factory Gains

Growing demand from households will give manufacturers reason to boost output. The Institute for Supply Management factory index, due Monday, will come in at 54, little changed from February’s 54.2, which was the highest since June 2011, according to economists’ estimates. Readings greater than 50 signal expansion.

General Motors Co. is among producers planning to take on more staff. The Detroit-based automaker said on March 6 it will hire 1,000 workers for an information technology operations center in the Phoenix area. The increase is part of GM’s goal of adding about 7,500 information technology employees.

Economists estimate this week’s employment report will show manufacturing payrolls climbed by 10,000 in March.

Service Industries

Services, the other 90 percent of the economy, are expanding as well. Figures out April 3 will show the ISM’s non- manufacturing index also grew in March. The gauge eased to 55.8 in March from 56 the prior month, a one-year high, according to the median estimate.

Stronger demand from customers overseas could help keep the U.S. economy humming. The trade deficit was probably little changed at $44.7 billion in February compared with $44.4 billion the prior month, Commerce Department figures are projected to show April 5.

The threat to growth comes from $85 billion in automatic government budget cuts, known as sequestration, that kicked in March 1 because Congress couldn’t compromise on a debt-reduction strategy. The plan trims 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.

© Copyright 2014 Bloomberg News. All rights reserved.

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