Employment Growth Slowed in February: U.S. Economy Preview By Vince Golle http://www.bloomberg.com/apps/news?pid=20601087&sid=aM_uHRjyg7mY&refer=home March 4 (Bloomberg) -- U.S. employers hired fewer workers in February than a month earlier as the economy struggled to overcome declines in housing and manufacturing, economists forecast a government report to show this week. The economy created 100,000 jobs last month, the fewest in two years, after a gain of 111,000 in January, according to the median forecast in a Bloomberg News survey of economists before the Labor Department's March 9 report. The jobless rate is projected to hold at 4.6 percent for a second month. A return to more seasonable temperatures, snowstorms during the week of the employment survey, and a decline in homebuilding point to a jump in firings at construction companies that limited payroll growth in February. Other employers are becoming more reluctant to hire as the economic slowdown that started toward the end of 2006 shows few signs of dissipating. ``We're probably at the beginning stages of seeing some caution on the part of businesses about hiring plans,'' said Chris Rupkey, senior financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. ``When the labor market starts to ease from tight conditions, it's a gradual process.'' Slower job growth may limit wage gains and make it difficult for consumer spending to accelerate at a time when corporations are buying less equipment and homebuilders are shying away from new projects. The jobs report takes on added importance in wake of the worst weekly decline in U.S. stocks since January 2003, economists said. The Standard & Poor's 500 Index fell to a three-month low, a drop fueled in part by signs the economy is slowing. `Reasonable Possibility' Federal Reserve Chairman Ben S. Bernanke, hoping to reassure investors that the expansion will remain intact, told lawmakers last week that ``there's a reasonable possibility that we'll see some strengthening of the economy sometime during the middle of the year.'' Homebuilders in January started work on the smallest number of new houses since August 1997, a government report last month showed. Residential construction slumped 19 percent last quarter after a similar decrease in the previous three months. With fewer homes being built, construction companies are cutting jobs. Economists at Morgan Stanley estimate the Labor Department will report a 25,000 increase in total non-farm employment with ``significant job loss'' in construction. Bad weather also figured in the projected drop in construction jobs. Planalytics Inc., a Wayne, Pennsylvania-based weather consulting firm, said a winter storm system that swept from the Midwest through the East Coast was the ``largest and most disruptive'' of the year. The South experienced thunderstorms, while widespread rainfall was reported in the Pacific Northwest. Factory Payrolls Shrink Manufacturing employment is forecast to decline by 20,000 in February, according to the Bloomberg survey. The decrease would bring to 153,000 the number of factory jobs eliminated in the last eight months. A report last week from the Commerce Department showed sales of capital goods, a figure used by the government in calculating gross domestic product, fell 2.7 percent in January, the most since September 2001. Orders for business equipment slumped 6 percent, the biggest decline since January 2004. A report on March 6 from Commerce is forecast to show total factory orders declined 4.5 percent in January. ``Recent weakness in capital goods orders suggests that corporations are still unwilling to take advantage of record profits and cheap financing,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. Lehman Brothers economists lowered their 2007 growth forecast to 2.4 percent from 2.7 percent. Services So far, service companies have taken up the slack, with employment averaging 186,000 jobs in the last three months. Education, health care, business services and trade and transportation have been among the industries leading the gains in service employment. The Institute for Supply Management tomorrow is forecast to report that it's index of non-manufacturing businesses eased to 57 in February from an eight-month high of 59 in January. Readings above 50 signal expansion. The slower pace of economic growth is also being reflected in figures on productivity. Worker efficiency grew at a slower pace last quarter than the government initially estimated and labor costs accelerated, the Labor Department is forecast to report March 6. Less Productive Productivity, a measure of how much an employee produces for each hour of work, may have risen at an annual rate of 1.5 percent, half the 3 percent pace first reported, according to economists surveyed. A measure of labor costs increased at a 3.2 percent, almost double the government's earlier 1.7 percent estimate. In other reports this week, the National Association of Realtors is forecast to report on March 8 that contract signings for purchases of previously owned homes dropped 1.4 percent in January. On March 9, the Commerce Department is forecast to report that the U.S. trade deficit shrank in January to $59.6 billion from $61.2 billion a month earlier. Lower energy prices helped reduce America's import bill, and a growing global economy kept U.S.-made goods flowing overseas. Bloomberg Survey Date Time Period Indicator BN Survey Prior 03/05 10:00 Feb. ISM Non-Manufacturing 57.0 59.0 03/06 8:30 4Q F Productivity 1.5% 3.0% 03/06 8:30 4Q F Unit Labor Costs 3.2% 1.7% 03/06 10:00 Jan. Factory Orders -4.5% 2.4% 03/06 10:00 Jan. Home Resales Pending -1.4% 4.9% 03/07 15:00 Jan. Consumer Credit $7B $6B 03/08 8:30 Feb. 24 Continuing Claims 2550K 2640K 03/08 8:30 March 3 Initial Jobless Claims 331K 338K 03/09 8:30 Feb. Avg. Hourly Earnings 0.3% 0.2% 03/09 8:30 Feb. Change Nonfarm Jobs 100K 111K 03/09 8:30 Jan. Trade Balance $-59.6B $-61.2B 03/09 8:30 Feb. Unemployment Rate 4.6% 4.6% 03/09 8:30 Jan. Wholesale Inventories 0.1% -0.5% 03/09 8:30 Jan. Wholesale Sales -0.2% 1.8%