July 3 (Bloomberg) -- The U.S. jobless rate in June may have reached a nine-year high as companies kept payrolls lean while waiting for the economy to accelerate, according to economists surveyed in advance of today's government report. Unemployment may have jumped to 6.2 percent last month, the highest since July 1994, from 6.1 percent in May, based on the median of 69 estimates in a Bloomberg News survey of economists. No change was expected for June payrolls after the elimination of 17,000 jobs a month earlier, the survey showed.
The economy grew at a 1.4 percent annual pace for a second consecutive quarter from January to March, and the effects of the war with Iraq restrained growth in the three months that ended Monday, economists said. The inability of the economy to gain traction is keeping companies focused on holding down payrolls to bolster profits. ``We are still going through a little bit of the side effects'' of the war, said Mat Johnson, chief economist at Quantit Economic Group LLC, a forecasting firm based in Sausalito, California. Companies ``are procrastinating a little bit on when to add employees'' until they are convinced there will be a sustained pickup in demand, he said. The Labor Department is to issue the report at 8:30 a.m. Washington time. The statistics are being reported a day earlier than the usual Friday because of the Independence Day holiday. At the same time today, the Labor Department may report that jobless claims rose last week to 410,000, based the median of 42 estimates in a Bloomberg survey, from 404,000.
Services Index
In a third report, the Institute for Supply Management may report a strengthening in the nation's services industry, which accounts for 85 percent of gross domestic product, economists said. The ISM's non-manufacturing index may have risen to 55 in June, the highest since November, from 54.5 a month earlier, according to a survey. That report is set for 10 a.m. Washington time. The economy may have expanded at a 2 percent annual pace in the second quarter, according to the median estimate of 60 economists in a Bloomberg News survey released today. Economists say gross domestic product needs to grow at a minimum pace of 3 percent to prompt hiring, something it hasn't done in consecutive quarters since the final six months of 1999. Stronger growth may be on the horizon, economists said. The economy may expand at a 3.5 percent annual rate during the current quarter and at 3.7 percent in the final three months of the year, the Bloomberg survey found.
`Close to a Peak'
``We are actually fairly close to a peak'' in the jobless rate, said Jan Hatzius, a senior economist at Goldman, Sachs & Co. in New York. The firm projects that the rate will peak at around 6.2 percent. ``The leading indicator for payrolls is claims,'' Hatzius said. Weekly applications for jobless benefits ``are telling you the job market is still weak, but job losses are slowing.'' The claims total of 404,000 for the week ended June 21 compared with an average of 431,400 a week in May. Economists generally consider 400,000 the dividing line between an improving and a deteriorating job market. The economy shed 131,000 jobs in the first five months of the year. Employers announced plans in June to cut 59,715 jobs, the fewest in 31 months and another sign that firings may be abating, Challenger, Gray & Christmas Inc., a Chicago-based placement firm that conducts a monthly survey, reported Tuesday. Last month's job- cut announcements were down 13 percent from May and 37 percent from a year ago. Manufacturers also may have slowed the pace of job cuts in June. Factories may have eliminated 35,000 jobs last month, the smallest drop since July 2002, compared with 53,000 in May, according to the Bloomberg survey median.
Slower Pace of Job Cuts
3Com Corp., the world's No. 3 maker of computer networking equipment, last week reported a fourth-quarter loss as sales fell. The company, based in Santa Clara, California, said in June it would eliminate about 400 jobs, a 10 percent reduction, in the next six months. The company had chopped its workforce in half in 2001 -- to 6,000 from 12,000 -- and has since cut 35 percent more, reducing the workforce to 3,900 at the end of February. While fewer jobs are being eliminated, there are scant signs of a rebound in hiring. Plans to add more workers in the third quarter are the lowest in 12 years, according to an April survey of 16,000 companies issued last week by Manpower Inc., a Milwaukee- based temporary-employment firm. An index of help-wanted advertising in major newspapers in May held at the lowest in more than 41 years, according to the Conference Board, a New York-based research firm.
A seasonal increase in job seekers as students joined the labor force during the summer holidays may have contributed to the projected rise in unemployment last month. ``Students will find a paucity of summer jobs,'' said Kathy Bostjancic, an economist at Merrill Lynch & Co. in New York, in a report. Merrill Lynch is one of two firms estimating the jobless rate rose to 6.3 percent. //www.bloomberg.com