Employment on the downslide as US slowdown shakes confidence

Washington: Employment probably cooled in August as slower economic growth caused some US companies to lose confidence the recovery will be sustained, economists said before a report today.

Private payrolls that exclude government agencies rose by 40,000 after a 71,000 July gain, and the jobless rate climbed to 9.6 per cent, according to the median estimate of economists surveyed by Bloomberg News. Total employment may have dropped for a third consecutive month as census workers were let go.

"Companies are still absolutely devoted to cost control," said Chris Low, chief economist at FTN Financial in New York. "The labour market has just gotten worse, and is consistent with consumer spending that's treading water."

Job cuts at companies like Northrop Grumman Corp. underscore the risk a retrenchment in hiring presents for American households, whose spending accounts for 70 per cent of the economy. Federal Reserve Chairman Ben S. Bernanke last week said growth and employment have slowed more than projected, and the central bank "will do all that it can" to maintain the expansion.

The Labour Department's report is scheduled for 8.30am. New York time. Private payroll estimates of the 55 economists surveyed ranged from a decline of 12,000 to a 120,000 increase.

Overall payrolls fell by 105,000 last month, according to the survey median, reflecting the dismissal of temporary workers hired by the government to conduct the decennial population count. The jobless rate in July was 9.5 per cent.

Another report today may show services, the biggest part of the economy, expanded at a weaker pace.

The Tempe, Arizona-based Institute for Supply Management's services gauge dropped in August to a six-month low of 53.2 from 54.3 the prior month, the median estimate of economists surveyed showed. Figures greater than 50 represent expansion for the industries that cover almost 90 per cent of the economy.

Unexpected rise

The group's factory report this week showed manufacturing unexpectedly picked up last month, propelled by gains in production and employment.

Economists forecast factory hiring climbed by 10,000 workers last month, the smallest gain this year.

The Standard & Poor 500 Index lost 4.7 per cent last month, making it the worst August since 2001, as concern grew that the world's largest economy was faltering. The Treasury 10-year note rallied the most on a monthly basis since late 2008. The US economy grew at a 1.6 per cent annual pace in the second quarter after expanding at a 3.7 per cent rate in the first three months of the year and 5 percent at the end of 2009. Some manufacturers are shedding workers. Northrop Grumman's shipbuilding unit last month announced 292 job cuts, with plans to slash another 350 by the end of the year.

"We are seeing the worst economy in my 35-plus years [of industry experience]," William Johnson, chief executive officer of H.J. Heinz Co., said on a conference call with analysts this week. "Consumer confidence has not returned."

‘Urgent task'

President Obama said in a speech this week declaring the end of the US combat mission in Iraq: "Our most urgent task is to restore our economy and put the millions of Americans who have lost their jobs back to work.

"This will be difficult. But in the days to come, it must be our central mission as a people."

The 650,000 increase in payrolls in the seven months through July shows it'll take years to recoup the 8.4 million jobs lost during the recession.