Payrolls Probably Grew as Recovery Spread: U.S. Economy Preview

May 2 (Bloomberg) -- Employers in the U.S. probably added jobs in April for the third time in four months, pointing to a recovery that is both broadening and gaining momentum, economists said before a government report this week.

Payrolls rose by 200,000, the most in three years, after increasing by 162,000 in March, according to the median forecast of 60 economists surveyed by Bloomberg News before the Labor Department’s May 7 report. Other figures may show consumer spending, home sales and manufacturing grew.

Companies from Caterpillar Inc. to General Electric Co. are hiring as Americans spend more and businesses update equipment. Sustained job growth is required to propel consumer spending, which accounts for about 70 percent of the economy.

“It’s really all about jobs,” said Omair Sharif, an economist at RBS Securities in Stamford, Connecticut. “Consumption has come back more robustly than most people had anticipated, including employers.”

The April payroll figures may receive a boost from the hiring of temporary government workers to conduct the 2010 census, economists such as Sharif said. Even so, gains are projected in others areas like manufacturing.

The Labor Department report will probably show the unemployment rate was 9.7 percent for a fourth straight month, according to the survey median. The jobless rate has not increased since October, when it reached a 26-year high of 10.1 percent. The economy lost 8.4 million jobs since the recession began in December 2007, the most of any downturn in the postwar era.

Fed’s View

Federal Reserve officials last week restated their intention to keep the benchmark interest rate near zero for an “extended period” and said the job market is strengthening.

“The labor market is beginning to improve,” policy makers said in an April 28 statement. “Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.”

The Labor Department’s employment report may also show a 15,000 gain in factory payrolls, according to the median estimate. Hiring is picking up as companies ramp up orders.

Manufacturing probably expanded in April at the fastest pace in more than five years, economists said before a May 3 report from the Institute for Supply Management. The Tempe, Arizona-based group’s factory index increased to 60, the highest level since June 2004, from 59.6, the survey showed. Index readings greater than 50 signal expansion.

Broadening Expansion

Service industries probably expanded in April at the fastest pace in four years, economists said before a separate report from the Institute for Supply Management on May 5. The index of non-manufacturing businesses, which account for almost 90 percent of the economy, rose to 56 from 55.4 the prior month, the survey showed.

The U.S. economy grew in the first quarter at a 3.2 percent annual rate, led by consumer spending and business investment, figures from the Commerce Department last week showed. Household spending climbed at a 3.6 percent pace, the most in three years, compared with a 1.6 percent increase the previous three months.

Optimism that the economy will keep growing has helped lift stocks. The Standard & Poor’s 500 Index has climbed 6.4 percent this year.

Americans probably increased spending in March for a sixth straight month, a report tomorrow from the Commerce Department may show tomorrow. Purchases climbed 0.6 percent after a 0.3 percent gain the previous month, and incomes likely rose 0.3 percent after no change in February, the survey showed.

Caterpillar Hiring

Caterpillar, the world’s largest maker of construction equipment, had its first earnings increase in seven quarters as demand rose, and said it will bring back at least 9,000 jobs this year of the 19,000 it cut globally in 2009. The Peoria, Illinois-based company has added about 1,500 workers since year- end because of higher production, including 600 in the U.S.

The housing market, a weak spot for the economy in recent years, is showing signs of life, helped in part by government incentives. The number of Americans in March signing contracts to purchase previously owned homes probably rose 4 percent, economists said ahead of a May 4 report from the National Association of Realtors.

Buyers may be aiming to take advantage of a tax credit that requires a contract be signed by the end of April, when the program expired. The index of purchase agreements, or pending home sales, rose 8.2 percent in February, the second-biggest gain on record and the largest since October 2001, according to the Washington-based Realtors group.