Payrolls Probably Declined at Slower Pace: U.S. Economy Preview

Employers in the U.S. probably cut jobs in August at a slower pace and manufacturing grew for the first time in more than a year, adding to evidence the worst recession since the 1930s is ending, economists said before reports this week.

Payrolls fell by 230,000 workers, the smallest decline in a year, according to the median of 65 estimates in a Bloomberg News survey ahead of a Sept. 4 Labor Department report. Figures from a private group of purchasing managers on Sept. 1 may show the first expansion at factories since January 2008.

“We are heading out of the tunnel,” said Jonathan Basile, an economist at Credit Suisse in New York. “It doesn’t mean we’ll have a very rapid recovery because consumers still face many headwinds.”

The worst employment slump in the post-World War II era, a record loss of wealth and mounting foreclosures are among the obstacles American households have to overcome before any recovery can gain speed. Government programs, including “cash for clunkers” and credits to first-time homebuyers, may help the economy expand in the second half of the year.

The jobless rate in August is likely to climb to 9.5 percent from 9.4 percent the prior month, according to economists surveyed by Bloomberg. Unemployment will reach 10 percent by early 2010, a Bloomberg poll this month showed.

Payroll losses peaked at 741,000 in January, the most since 1949. The U.S. has lost 6.7 million jobs since the recession began in December 2007.

Job Cuts

Some companies continue to eliminate jobs to cut costs and boost profits amid weak sales. Whirlpool Corp., the world’s largest appliance maker, said last week it will close a manufacturing plant in Evansville, Indiana, resulting in the loss of 1,100 jobs, or about 1.6 percent of the company’s workforce.

A record reduction in inventories over the first half of the year sets the stage for production to rebound, economists said. Companies including General Motors Co. and Chrysler Group LLC, both out of bankruptcy, may benefit from higher sales and a boost to output from the government’s “cash-for-clunkers” effort.

The incentive program, which offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles, produced almost 700,000 automobile sales before ending on Aug. 24, the Transportation Department said last week.