Washington, May 2 (Bloomberg) -- The U.S. unemployment rate probably approached an eight-year high in April as the economy lost jobs for a third consecutive month, economists said in advance of today's government report. Companies likely eliminated 60,000 jobs last month, based on the median of 67 forecasts in a Bloomberg News survey, bringing the three-month decline to 525,000. The unemployment rate is forecast to have risen a tenth of a percent to 5.9 percent, close to the eight-year high of 6 percent reached in December. Companies and government agencies have cut payrolls to control costs, prompted by rising budget deficits and weak demand linked partly to concerns about the Iraq war and terrorism. The job losses threaten consumer spending, which accounts for 70 percent of the economy. ``The mantra for businesses right now is flexibility and caution,'' said Sung Won Sohn, chief economist at Wells Fargo & Co. Sustained job losses ``would see consumer spending peter out and eventually the economy could peter out as well.'' The only other time since World War II that the economy lost jobs for three straight months without being in recession was during a 1952 steel industry strike. While economists estimate a recession that began March 2001 ended later that year, the private group that dates business cycles has never called an official end. A plan that President George W. Bush says will add jobs by cutting at least $550 billion in taxes in the next decade has run into opposition in Congress, where some members say it will exacerbate a swelling federal budget deficit.
Growth, Spending
The Labor Department issues its April jobs report at 8:30 a.m. Washington time. At 10 a.m. Washington time, the Commerce Department will report on March factory orders, and the median of economists forecasts suggests orders increased 1.2 percent during the month after falling 1.5 percent in February. The economy grew at a 1.6 percent annual pace in this year's first three months as consumer spending rose at a 1.4 percent pace. Spending hadn't been weaker since 1993's first quarter. Sluggish demand had left automakers with too much inventory, forcing them to close plants temporarily to trim production and curtail stocks. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit, which yesterday all reported lower April sales, closed 6 plants in the U.S. during the week of April 7. That corresponds to the week the Labor Department took its survey and left more than 15,000 workers temporarily unemployed during the week. That's one reason first-time claims for unemployment insurance benefits jumped two weeks ago to the highest in a year. Claims last week remained above 400,000, a level which economists consider a sign of a weak job market, for the 11th straight week, the Labor Department reported yesterday.
`Temporary Phenomenon'
``Unless there's a quick improvement, they (claims) point to a May jobs drop,'' said Christopher Low, chief economist at FTN Financial in New York. Federal Reserve Chairman Alan Greenspan is confident that demand will rebound now that the fighting in Iraq has ended and consumer confidence is bouncing back. Only two of 51 economists in a Bloomberg News survey expect Fed policy makers to cut the benchmark interest rate at Tuesday's meeting. The current rate of unemployment is a ``temporary phenomenon,'' Greenspan said in testimony to Congress Wednesday. ``As you look across the spectrum of most economic analysts, even though we and they don't see the immediate effects of the end of Iraqi war, most people have fairly strong increases in demand and enough to cause a marked increase in the level of employment.''
Rising Confidence
The biggest increase in consumer confidence in 12 years last month may be an initial step toward a pickup in spending. ``We're encouraged by higher consumer confidence readings,'' said James O'Connor, the executive who overseas Ford's North American marketing and sales, in a statement yesterday. ``A more confident consumer enhances the prospect that consumer spending will improve in the second half of the year.'' Ford announced it would build 990,000 vehicles this quarter, 10,000 more than it projected last month. Others aren't as confident demand will rebound. AMR Corp's American Airlines worked out a cost-saving plan with its unions last week to avoid bankruptcy that may eventually cause more than 7,000 employees to loose their jobs. Furlough notices started going out this week to 1,300 mechanics. The call up of military reservists will also continue to depress the job numbers this month, economist said. Defense Department figures show the U.S. ordered 32,594 reservists to mobilize from mid-March to mid-April, which includes the period corresponding to the Labor Department survey.
The government instructs companies to exclude from their payroll counts workers called up to serve in the armed forces because they are no longer in the civilian labor force. Budget constraints are also forcing state and local governments to cut jobs. A total of 40,000 government workers lost their jobs in March, the most since September 2000 when census workers were no longer needed. ``A number of sectors will contract in April, raising the possibility that the labor market's sour tone is not temporary, but rather more fundamental,'' said Joseph Abate, an economist at Lehman Brothers Inc. in New York. //www.bloomberg.com