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Economy Likely Shed 80,000 Jobs in April
Reuters
Wednesday 30 April 2008
Washington - The economy likely shed more jobs in April as the economy continued
to weaken against the backdrop of a deeper deterioration in the housing market
and a growing credit crunch.
Economists polled by Reuters ahead of the Labor Department report to be released
on Friday at 8:30 a.m. EDT have forecast that the economy lost 80,000 jobs after
losing the same amount a month earlier.
That cut in jobs is likely to bring the unemployment rate up to 5.2 percent
from 5.1 percent.
"We anticipate that private payrolls will continue to decline in the months
ahead, and we expect that the unemployment rate will rise to 5.6 percent by
the fourth quarter and then average 5.7 percent in the first half of next year,"
said Abiel Reinhart, economist with JPMorgan Chase in New York.
The brunt of the job cuts so far this year, nearly a quarter of a million,
have come from the manufacturing and housing sector and economists expect this
trend to continue.
Typically, in an economic slowdown, the economy loses up to 2 million jobs.
So far this year, a quarter of a million jobs have been lost and economists
say the trend will continue, particularly as consumers - who fuel roughly two-thirds
of economic output - cut back on spending.
"Retail trade employment will continue to face pressure as the consumer
struggles, and nonresidential construction employment cuts will probably continue
to get worse," Reinhart said. "The financial sector certainly doesn't
look like its about to go on a hiring binge."
A separate report out on Wednesday by ADP Employer Services showed that private-sector
employers added 10,000 jobs in April. And while this gain was much better than
the 60,000 job cuts economists were expecting to see, economists did not expect
that Friday's report would show a better picture.
"Plugging the ADP data into our model and allowing for the strong tendency
for the official data to undershoot in recent months, we reckon Friday's payroll
number will be about -70K, compared to our prior forecast of -100K. This is
still easily enough to keep the unemployment rate heading higher," said
Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla,
New York.
Over the next year, the economy is likely to see steady job cuts, an average
of about 75,000 a month, according to Joseph LaVorgna, chief economist at Deutsche
Bank in New York.
"It will not be a deep recession, but it will be only a very most recovery
next year," he said, adding that government rebate checks soon to be in
the hands of consumers will do little to improve the economy's outlook.
"Rising food and energy prices really do dent consumer spending and while
the rebate will help, most of it will go toward filling up the tank," he
said.
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(Reporting by Joanne Morrison; Editing by Chizu Nomiyama).
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