Economists expect increase in payrolls - East Valley Tribune: Business

Economists expect increase in payrolls

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Posted: Friday, March 4, 2005 5:34 am | Updated: 9:15 am, Fri Oct 7, 2011.

WASHINGTON - The Labor Department will release the unemployment numbers for February at 8:30 a.m. EST today. Economists expect an increase of 220,000 in payrolls and see the jobless rate holding at 5.2 percent.

Also this morning, the Commerce Department will release its January factory orders report, at 10 a.m. EST. Economists look for a 0.3 percent increase.

The productivity of American workers rose at an annual rate of 2.1 percent in the final three months of last year, sharply higher than originally believed.

The Labor Department had initially reported a month ago that productivity - the amount of output per hour of work - had risen by just 0.8 percent in the October-December quarter, a figure that had jolted financial markets because it raised worries that inflation pressures could be mounting.

The better-than-expected 2.1 percent revised estimate for productivity left this indicator for all of 2004 rising by 4 percent, the department said Thursday, capping the strongest three-year period for productivity growth in more than a half-century of record keeping.

Productivity is the key component for rising living standards.

In a separate report, the department said the number of Americans filing first-time claims for unemployment benefits dipped by 1,000 last week to a seasonally adjusted 310,000.

It marked the fourth decline in jobless claims in the past five weeks and pushed the four-week moving average for new claims down to 307,000. That was the lowest level since the week of Oct. 28, 2000 when the country was in the final year of a record-breaking 10-year long economic expansion.

In other economic news, many of the nation's large retail chain stores reported stronger-than-expected sales in February. Analysts said new spring fashions and bigger tax refunds helped boost spending in the face of another spike in oil prices and severe winter storms in the Northeast and Midwest.

The initial reaction on Wall Street was positive to the strong chain store sales reports and the better-than-expected upward revision in productivity. However, in later trading the Dow Jones industrial average slipped and ended the day up 21 points at 10,833.

Economists noted that the upward revision to a 2.1 percent productivity growth rate in the fourth quarter was accompanied by a downward revision to a 1.3 percent increase in unit labor costs, an index of inflation pressures closely watched by the Federal Reserve. With the fourth quarter increase, unit labor costs over the past year have risen by 1.4 percent, the fastest 12-month jump since early 2001.

"It is too early and there remains too much labor slack to get overly concerned about wage-generated inflation pressures, but the trends are moving in the wrong direction," said Steve Stanley, chief economist at RBS Greenwich Capital.

Analysts said they believed the latest data would keep the Fed on a course of steady quarter-point interest rate increases in coming months as a way of making sure that a rebounding economy does not generate unwanted inflation.

Productivity allows businesses to pay workers more for their increased output without having to raise the price of their products.

The upward revision to a 2.1 percent growth rate for productivity in the fourth quarter reflected stronger growth in output than originally estimated. The government last week revised its estimate for growth in the gross domestic product - the country's total output of goods and services to an annual rate of 3.8 percent in the fourth quarter, up from an original estimate of 3.1 percent.

The 2.1 percent increase for productivity in the fourth quarter followed a much slower 1.3 percent productivity increase in the third quarter. Both quarters reflected a slowdown from productivity increases at a rate of 3.8 percent in the first quarter and 3.9 percent in the second quarter of last year.

For all of 2004, productivity rose by 4 percent following gains of 4.4 percent in 2003 and 4.3 percent in 2001. The average gain in productivity over the past three years has been 4.3 percent, the best on record.

The strong gains in productivity, while laying the groundwork for rising living standards, do come with a cost. Businesses have obtained the productivity increases by getting more work from their current work force, rather than hiring new workers.

However, economists believe that businesses are running out of room to boost output in this way and are starting to hire more workers, a development that has helped to end a prolonged period of weak job growth.

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