WASHINGTON – U.S. employment likely bounced back in August after disappointing gains in June and July, analysts said Wednesday, offering some consolation to President Bush ahead of the November election.
Economists believe 160,000 jobs were created last month, five times the paltry 32,000 gain in July. But the forecast, an average of 23 estimates, comes with a disclaimer: analysts were way off the mark in June and July, and many offered preemptive explanations for why their guesses could be wrong again.
"Everybody is a little gun-shy after those last two numbers; they seemed unbelievably low," said Mark Vitner, senior economist at Wachovia Securities (search).
Vitner said Wachovia's official forecast is for a fairly modest gain of 175,000 jobs in August — but he really thinks the economy is doing better than that.
"I simply do not believe that job growth has been as weak as has been reported. It seems totally out of line with what we've seen in the rest of the economy," he said.
The Labor Department's (search) closely watched payrolls report for August is due on Friday.
In June and July, the two-month payroll gain came in at just 110,000 jobs — some 368,000 below forecasts. But new claims for unemployment benefits have been trending lower, housing continues to boom, and retail spending and car sales bounced back in the summer after a widely acknowledged soft patch in the spring.
The nation's growth slowed to just 2.8 percent in the second quarter from a 4.5 percent annual pace in the first three months of the year, as the rising price of oil unnerved consumers and curbed spending.
Job growth has become a critical issue in recent months, not only for the president — who is trying to erase a 1.1 million net job loss since he took office — but also for the Federal Reserve (search), which has begun raising interest rates.
The Fed is widely expected to increase borrowing costs again in September — after hikes in June and August — to head off inflation and return interest rates to neutral levels after years of ultra-low lending rates.
But a third month of lousy job growth might call that strategy into question.
"There's probably a limit on how quickly Chairman (Alan) Greenspan and company will want to tighten if the news on U.S. jobs remains poor," said Rory Robertson, interest-rate strategist at Macquarie Bank. "It would be a bold decision to keep tightening while a sizable question mark remains over the self-sustaining nature of the current expansion."
Still, even modest job growth in August would probably be enough to reassure investors, analysts said — while a third month of only double-digit gains would be unsettling.
"Anything below 100,000 I think would be a disappointment, given that you would then have three months in a row with less than 100,000. That would be consistent with the idea that the economy is slowing down," said Jan Hatzius, international economist at Goldman Sachs (search).
Friday's jobs report is also expected to show the unemployment rate unchanged at 5.5 percent, the workweek steady at 33.7 hours and a 0.2 percent rise in hourly earnings, according to a Reuters poll of analysts.
While there were some early concerns that Hurricane Charley would add to unemployment in August, analysts said the impact would only be slight, since the storm hit on Friday, at the very tail end of the Labor Department's survey period.
"If it impacts anything it will impact hours worked because Tampa was essentially evacuated," said Vitner. "In terms of job growth it would only affect people who would have been hired on that day ... (It probably cost) less than 10,000 jobs."