Expectations modest prior to U.S. reportsThe economy probably slowed in the third quarter and employers hired fewer workers in October, indicating the U.S. expansion was losing momentum even before the partial government shutdown, economists expect reports to show this week.
Gross domestic product grew at a 2 percent annualized rate after a 2.5 percent pace from April through June, according to the median forecast of 69 economists surveyed before Commerce Department figures due Thursday. Consumer spending, the biggest part of the economy, was probably the weakest since 2011. Payrolls rose by 125,000 workers in October after a 148,000 gain in September, Labor Department figures might show.
A drop in government output and restrained business and consumer purchases due to the 16-day shutdown last month have prompted economists to trim fourth-quarter growth forecasts, a separate survey showed. Tepid hiring and a jobless rate that’s projected to have climbed in October help explain why Federal Reserve policy makers are pressing on with stimulus.
“The economy still has growth, but it’s just very moderate,” said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina. “Job gains and wage gains remain weak. That’s a challenge for consumer spending.”
The GDP report may show consumer spending, which accounts for about 70 percent of the economy, grew at a 1.6 percent annualized rate, the smallest gain since the second quarter of 2011, according to the survey median. Purchases advanced 1.8 percent from April through June.
The jobs report may show the unemployment rate, derived from a separate Labor Department survey of households than the payrolls tally, rose to 7.3 percent, according to the survey. It was 7.2 percent in September, the lowest since November 2008. Private employment, which excludes government agencies, climbed 130,000 after rising 126,000, economists projected ahead of the Friday data.
Companies that announced job cuts last month include Coldwater Creek, a retailer of women’s clothing, which plans to cut 20 percent of its workforce. Strayer Education Inc., a for-profit college operator, also said it expects a 20 percent reduction in headcount as it closes about 20 locations.
Motor vehicle purchases have been a bright spot in the expansion as Americans take advantage of cheaper borrowing costs to replace older models.
Cars and light trucks sold at a 15.2 million annual rate last month, matching the September pace, according to data from Ward’s Automotive Group.
Growth this quarter will be less than economists projected at the start of the budget impasse Oct. 1. GDP will expand at a 2 percent annualized rate in the final three months of the year, according to the median projection in a survey last Thursday, down from a 2.4 percent forecast.
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