July 2 (Bloomberg) -- Employers in the U.S. probably cut an additional 365,000 jobs in June, a government report may show today, offering little evidence the Obama administration’s stimulus package is shoring up the labor market.
The payroll decline would follow a 345,000 drop in May, according to the median estimate of 79 economists in a Bloomberg News survey. The jobless rate likely climbed to 9.6 percent, the highest since 1983.
Unemployment is projected to keep rising for the rest of the year just as the income boost from the stimulus package fades, undermining prospects for a sustained rebound in household purchases, analysts said. As companies from General Motors Corp. to Kimberly-Clark Corp. cut costs, the lack of jobs will limit any recovery.
“It’s a tough labor market to be sure,” said Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. in New York. “It raises the risk of a potential double-dip in consumer spending. Rising unemployment makes it very sensitive politically.”
The Labor Department report is due at 8:30 a.m. in Washington. Economists’ forecasts for payroll declines ranged from 150,000 to 500,000. Job losses peaked at 741,000 in January, the most since 1949.
The yield on the benchmark 10-year note has dropped since reaching a seven-month high of 3.95 percent on June 10 on growing concern that any economic recovery will be muted. The yield was at 3.54 percent late yesterday.
Biggest Slump
The payroll projection for June would extend the employment slump since the recession began in December 2007 to 6.3 million, the biggest loss in the post-World War II era.
Estimates for the unemployment rate ranged from 9.3 percent to 9.7 percent, compared with May’s 9.4 percent. By the end of the year, unemployment will reach 10 percent, according to the median forecast of economists surveyed last month.
Unemployment will “remain painfully high for several more years,” Federal Reserve Bank of San Francisco President Janet Yellen said this week. “I expect that we will turn the growth corner sometime later this year, but I am not optimistic that the economy will spring back to normal any time soon.”
Tax cuts and Social Security payments under the stimulus plan propped up incomes last quarter, supporting household purchases. Consumer spending rose in May as earnings climbed 1.4 percent, the most in a year.
Save More
Still, the wealth destruction caused by the housing and stock-market slumps prompted Americans to rebuild nest eggs. The savings rate in May surged to a 15-year high.
Household purchases, which account for about 70 percent of the economy, dropped at a 0.6 percent annual rate last quarter before growing again in the second half of the year, according to the median forecast of economists surveyed by Bloomberg in early June. Purchases rose at a 1.4 percent pace in the first three months of 2009.
Manufacturers probably reduced payrolls by 150,000 in June, the survey showed. More firings are in the works following the bankruptcies of GM and Chrysler LLC as shutdowns ripple through auto-parts makers and car dealers.
The auto industry isn’t alone in trimming jobs. Kimberly- Clark, the maker of Huggies diapers and Kleenex tissues, plans to cut 1,600 jobs worldwide by year-end. About 800 salaried employees will leave Deere & Co., the world’s largest maker of agricultural equipment, under a voluntary program.
‘Difficult’ Actions
“These actions, while difficult, are necessary to help us emerge from this demanding economic environment,” Kimberly- Clark’s Chairman and Chief Executive Officer Tom Falk said in a June 25 statement. The company’s net income has declined for six straight quarters.
3M Co., the maker of Post-it Notes and Scotch Tape, reduced positions and offered early retirement to workers, while Dow Chemical Co., the largest U.S. chemical maker, is cutting jobs following the acquisition of Rohm & Haas Co.
Service providers and government agencies are also looking to lower costs. Gannett Co., the largest U.S. newspaper publisher, yesterday announced it will eliminate about 1,400 jobs by July 9. California Governor Arnold Schwarzenegger said he’ll force state workers to take a third unpaid day off every month to conserve cash and will order lawmakers into an emergency session to tackle the state’s growing budget deficit.
Bloomberg Survey
