Unemployment Probably Rose at Slower Pace: U.S. Economy Preview

June 28 (Bloomberg) -- Unemployment in the U.S. probably rose at a slower pace and the manufacturing slump eased this month as evidence mounted that the end of recession is in view, economists said before reports this week.

The jobless rate rose 0.2 percentage point to 9.6 percent, the highest level in 26 years, according to the median of 58 estimates in a Bloomberg News survey. The gain would be the smallest since November 2008. A survey of purchasing managers may show manufacturing shrank at the mildest pace in 10 months.

Government efforts to stabilize housing and consumer spending are only now starting to pay off, indicating it will take months before a recovery develops. The job market will remain one of the biggest threats to the emerging rebound as companies from General Motors Corp. to Kimberly-Clark Corp. focus on cutting costs by trimming payrolls.

“We need more improvement in the labor market for the recovery theme to play out,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We’ve seen an inflection point in employment, with the rate of declines diminishing. The numbers will get better in the second half.”

The Labor Department’s employment report is due July 2. The figures may also show employers cut 350,000 workers from payrolls in June compared with 345,000 in May, according to the Bloomberg survey median. The economy lost about 691,000 jobs a month on average in the first quarter.

Employers have eliminated 6 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era.

10 Percent

By the end of the year, unemployment may reach 10 percent, a separate Bloomberg survey showed this month.

The payrolls report may also show manufacturers slashed workers this month. The job reductions and plant shutdowns may persist, reflecting the fallout from the bankruptcies of GM and Chrysler LLC.

Outside of autos, the downturn may be easing. A July 1 report from the Tempe, Arizona-based Institute for Supply Management may show its manufacturing index rose to 44.5 in June, the highest level since last August, from 42.8 in May, according to the Bloomberg survey median. Readings below 50 signal contraction.

Factory orders, to be released by the Commerce Department on July 2, probably rose in May for the third time in four months, economists predicted.

Job Cuts

Companies such as Kimberly-Clark, the maker of Huggies diapers and Kleenex tissues, are trimming costs. The Dallas- based company, whose net income has fallen for six straight quarters, will cut 1,600 jobs worldwide by year-end.

The “demanding economic environment” prompted the move, Chief Executive Officer Tom Falk said in a June 25 statement.

The economy shrank at a 5.5 percent annual pace in the first quarter, capping the worst six-month performance in half a century, according to revised government figures.

Expectations that the U.S. will start growing again in the second half of this year are helping lift Americans’ moods. Economists in the Bloomberg survey predict consumer confidence in June probably rose to the highest level since September 2008. The Conference Board will issue its report on June 30.

The Standard & Poor’s 500 Stock Index has gained 36 percent since March 9, when it hit 676.53, the lowest level in more than 12 years, amid signs the economy may start growing again this year. The index closed at 918.90 on June 26 in New York.

Housing data this week may signal stabilization. The National Association of Realtors report on July 1 may show more Americans signed contracts to buy previously owned homes in May for the fourth straight month, the longest string of gains since 2004.

A report from S&P/Case-Shiller June 30 may show declines in home prices are steadying.