By Shobhana Chandra
May 8 (Bloomberg) -- Payrolls in the U.S. shrank last month by the least since October as employers detected signs the worst of the recession had passed and government hiring stepped up for the country’s next census.
Payrolls fell by 539,000, after a 699,000 loss in March, while the unemployment rate rose to 8.9 percent, the highest level since 1983, the Labor Department said today in Washington. The Commerce Department separately said that wholesalers reduced their supply of unsold goods for a seventh month in March.
Today’s figures indicate a waning in the deterioration of the labor market, which has seen 5.7 million workers lose their jobs since payrolls started dropping in January of last year. At the same time, the jobless rate probably won’t start retreating until an economic recovery is secured, and the loss in wages will hold back consumer spending for months, analysts said.
“We appear to have passed the point of the most severe job losses,” saidDean Maki, co-head of U.S. economic research at Barclays Capital Inc. in New York. “It’s still a weakening labor market but it’s weakening less fast. There are a few headwinds to growth, and a recovery will” likely be “modest.”
DuPont Co. and Microsoft Corp. this week said more staff reductions may be necessary. Part of the reduction in job losses in April was due to a jump in government jobs, spurred by the hiring of 60,000 people to help in the 2010 census.
Stocks Rose
Stocks rallied today after the conclusion of financial regulators’ stress test on the largest U.S. banks, and Treasuries gained. The Standard & Poor’s 500 Stock Index was up 2.4 percent at 929.28 as of 3:02 p.m. in New York, and yields on benchmark 10-year notes fell to 3.29 percent from 3.34 percent late yesterday.
Revisions subtracted 66,000 from payroll figures previously reported for March and February.
One bright spot was government, with public payrolls rising by 72,000 after falling by 6,000. The U.S. Census Bureau began hiring 140,000 temporary workers last month to start conducting the population count that happens once every 10 years. It will hire more than 1.4 million people over the next year.
Payrolls were forecast to drop 600,000 after a 663,000 decrease initially reported for March, according to the median of 70 economists surveyed by Bloomberg News. Estimates ranged from losses of 360,000 to 750,000.
The jobless rate was projected to jump to 8.9 percent from 8.5 percent. Forecasts ranged from 8.6 percent to 9.1 percent.
Great Depression
Since the recession started in December 2007, the world’s largest economy has lost the most jobs of any economic slump since the Great Depression.
Christina Romer, head of the White House Council of Economic Advisers, today said while the job losses are “very distressing” they don’t compare with levels seen in the 1930s, when unemployment soared to about 25 percent.
“We are seeing a lot of numbers that are suggesting glimmers of hope,” Romer said in an interview on Bloomberg Television. “There are reasons to expect these job losses to continue to moderate,” she said, because consumers are “starting to spend again” and President Barack Obama’s $787 billion stimulus package “is hitting the economy.”
Today’s report showed factory payrolls fell by 149,000 after decreasing by 167,000 in the prior month. Economists forecast a drop of 155,000. The decline included a drop of 29,100 jobs in auto manufacturing and parts industries.
Stress Tests
Payrolls at builders fell 110,000 after decreasing 135,000. Financial firms decreased payrolls by 40,000, after a 43,000 drop the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 269,000 workers after falling 381,000. Retail payrolls decreased by 46,700 after a 63,900 decline.
The jobless rate may rise to 9.5 percent by year-end, economists said in an April Bloomberg survey. Tests run by the government to determine whether 19 of the largest U.S. banks had enough capital to withstand deterioration in the economy used an “adverse scenario” that included an average unemployment rate of 8.9 percent in 2009 and 10.3 percent next year.
The results, issued yesterday, showed 10 banks needed to raise a total of $74.6 billion in capital and that losses under “more adverse” economic conditions than most economists anticipate could total $599.2 billion over two years. Mortgage losses present the biggest part of the risk, at $185.5 billion.
Auto Industry
“We are likely to see further sizable job losses and increased unemployment in coming months,” Federal Reserve Chairman Ben S. Bernanke said in testimony to lawmakers this week. Still, policy makers “expect economic activity to bottom out, then to turn up later this year.”
Automakers are among the hardest hit industries. Vehicles sold at a 9.3 million annual pace in April, less than forecast and down from a 9.9 million pace a month earlier, industry figures showed last week.
More job cuts may be in train. Chrysler LLC was pushed into bankruptcy by the government last week, and General Motors Corp., surviving on U.S. loans, is working to beat a June 1 bankruptcy deadline.
Job losses threaten to restrain consumer spending after a first-quarter rebound. Americans will probably retrench again this quarter before spending shows sustained gains in the second half of 2009, according to economists surveyed last month.
Further Cuts
DuPont, the third-biggest U.S. chemical maker, plans to eliminate an additional 2,000 positions, while Microsoft, the world’s largest software maker, may reduce staff further even as it is completing most of its 5,000 job cuts faster than planned.
“We will continue to closely monitor the impact of the economic downturn,” Chief Executive Officer Steve Ballmer said in a e-mail to staff obtained by Bloomberg News. Redmond, Washington-based Microsoft will, “if necessary, take further actions on our cost structure including additional job eliminations.”
Some companies are trying to cut costs in other ways. The Boston Globe, a 137-year-old newspaper owned by New York Times Co., this week reached a tentative deal with its largest union on pay cuts, while PC Mall Inc., an Internet retailer of personal computers, began an employee furlough program for 2009.
Today’s report also showed the average work week held at 33.2 hours in April. Average weekly hours worked by production workers rose to 39.6 hours from 39.4 hours, while overtime increased to 2.7 hours from 2.6 hours. That brought the average weekly earnings up to $614.53 from $614.20.
Workers’ average hourly wages were little changed at $18.51 from the prior month. Hourly earnings were 3.2 percent higher than April 2008. Economists surveyed by Bloomberg had forecast a 0.2 percent increase from the prior month and a 3.3 percent gain for the 12-month period.
