Employment in the U.S. slowed in October as a worsening housing slump led to firings at homebuilders, manufacturers and mortgage lenders, economists said before a report today.
Payrolls grew by 85,000 after a gain of 110,000 in September, according to the median estimate of 86 economists surveyed by Bloomberg News. The jobless rate held at 4.7 percent for a second month, based on the survey.
Wage gains may slow as employment weakens, increasing the burden on consumers already saddled with rising fuel costs and declining home values. The Federal Reserve has lowered the benchmark interest rate twice in as many months to prevent the real-estate recession from dragging down the rest of the economy.
"The next shoe to drop is that the labor market starts to soften," said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. "There's some tentative evidence of it."
The Labor Department report is due at 8:30am in Washington. Projections ranged from increases of 10,000 to 121,000. An October gain as forecast would cap the smallest four-month increase in four years.
Estimates for the jobless rate ranged from 4.6 percent to 4.9 percent. The rate dropped to 4.4 percent in March, matching the October 2006 level as the lowest in five years.
UK wage negotiators agreed on the smallest salary increases since September 2006 in the quarter through October as employers gave minimum pay raises to their lowest-earning workers, Incomes Data Services said.
The median pay settlement fell to 3.2 percent from 3.4 percent in the three months through September, the researcher said in an e-mailed statement today. The reading is based on 65 settlements covering about 1.5 million workers. About three- quarters of agreements in 'lower-paying' industries, such as retail and non-profit, were at or below 3 percent.
Salary gains for the lowest-paid slowed after the government ordered a 3.2 percent increase in the national minimum wage, the smallest gain since 2002. Bank of England policy maker David Blanchflower said wage growth will stay 'muted' as a record wave of immigration helps curb inflation pressures.
"It's the lowest increase in a long time for the national minimum wage, and it's having an impact on settlements," Ken Mulkearn, editor of the London-based IDS's pay report, said in an interview. The last time the minimum increase was lower was in 2002, when the gain was 2.4 percent, he said.
Among the settlements reached during the period, Marks & Spencer Plc, the U.K.'s biggest clothing retailer, agreed to a 2.7 percent pay increase for its customer assistants, the report said. Staff at the Natural History Museum in London were given a 1.8 percent salary rise.
Inflation in the 13 countries that use the euro hit a two-year high in October, while unemployment fell to a record low in September, the EU statistics agency said Wednesday. But the stronger euro finally seems to be hurting the outlook for industry.
Industry managers were more downbeat about future prospects and euro consumer confidence was unchanged during October as officials warned of more uncertain times ahead for the global economy.
Managers' export expectations for the months ahead fell sharply for the first time in almost three years in both the EU and euro area, indicating that the high value of the euro seems to be taking a toll.
The currency is now a fifth above its long-term average against the dollar, making products far more expensive for the EU's biggest export market, the United States.
EU officials have downgraded growth forecasts for next year because they are unsure how far the ripples of recent financial market jitters would spread. Banks remain reluctant to lend to each other, making it harder for businesses and home buyers to get credit.
Japan's worst housing slump in four decades and rising oil prices threaten growth in the world's second-largest economy, cabinet ministers said.
"There is concern that a decline in housing investment will become a factor pushing down gross domestic product," Economic and Fiscal Policy Minister Hiroko Ota said in Tokyo. "I'm more focused on the downside risks to the economy."
Housing starts fell 44 percent in September and 43.3 percent in August because of stricter rules for obtaining building permits. The government this week said it would relax the regulations after industry criticism that they were too onerous.
"We've heard that the Land Ministry has taken some measures, but there will be some impact in any case," Finance Minister Fukushiro Nukaga told reporters.
The Bank of Japan this week cut its economic growth forecast to 1.8 percent from 2.1 percent for the year ending March, in part because of the drop in construction activity.
Credit Suisse Group today said the economy will expand 1.3 percent in the period, slower than the 1.7 percent predicted last month and 2.9 percent estimated in July.
"The slump in construction investments may hurt manufacturers, dragging down industrial production and capital investment," said Hiromichi Shirakawa, chief Japan economist at Credit Suisse and a former central bank official.
Morning Market Rates:
(Indication prices only, they are not offer rates)
GBP/USD: 2.0711
GBP/EUR: 1.4251
GBP/AUD: 2.2517
GBP/CHF: 2.3884
GBP/ZAR: 13.5511
USD/JPY: 113.68
USD/ZAR: 6.4951
EUR/USD: 1.4372
EUR/ZAR: 9.5126
GBP/NZD: 2.7139
GBP/AED: 7.4571
GBP/CYP: 0.8361
GBP/CAD: 1.9599
GBP/THB: 65.62
Comments