U.S. Job Cuts Slow, Signaling Worst of Recession May Be Over By Shobhana Chandra
May 9 (Bloomberg) -- Payrolls in the U.S. shrank in April by the least in six months as the worst recession in half a century started to ease and the federal government stepped up hiring for the country's next census. Payrolls fell by 539,000, fewer than economists forecast, after a 699,000 loss in March, Labor Department figures showed yesterday in Washington. Still, the unemployment rate jumped to 8.9 percent, the highest level since 1983. The economy has lost 5.7 million 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. "The most intense pace of reductions in the labor market appear to be behind us," said Joseph Brusuelas, director at Moody's Economy.com in West Chester, Pennsylvania. "The economy has taken several tentative steps on the road to stabilization." 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 about 60,000 people to help in the 2010 census. Stocks rallied yesterday after the conclusion of financial regulators' stress test on the largest U.S. banks, and Treasuries gained. The Standard & Poor's 500 Stock Index rose 2.4 percent to 929.23, and yields on benchmark 10-year notes fell to 3.29 percent in New York from 3.34 percent a day earlier. Negative Revisions Revisions for figures previously reported for March and February subtracted 66,000 more workers from payrolls. "The numbers are sobering," U.S. Labor Secretary Hilda Solis said in a conference call with reporters yesterday. "We may see more layoffs but we may see a slowing" in the pace. Public payrolls rose by 72,000 after falling 6,000. The U.S. Census Bureau, which began hiring temporary workers to start conducting the population count that happens once every 10 years, will add 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 matched the projection of 8.9 percent, and was up from 8.5 percent in March. Forecasts ranged from 8.6 percent to 9.1 percent. Worst Slump 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, 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 yesterday. Consumers are "starting to spend again" and President Barack Obama's $787 billion stimulus package "is hitting the economy." Factory payrolls fell by 149,000 in April 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. Payrolls at builders fell 110,000 after decreasing 135,000 the prior month. Financial firms cut payrolls by 40,000, after a 43,000 reduction. Smaller Drop 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 on May 7, 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. Bernanke's View "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. 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."
