By Joe Richter
Sept. 30 (Bloomberg) -- Unemployment in the U.S. probably rose to a one-year high in September and manufacturing slowed for a third month as the housing recession reverberated through the economy, economists said before reports this week.
The jobless rate rose to 4.7 percent even as hiring rebounded, according to the median forecast in a Bloomberg News survey of economists before an Oct. 5 government report. Industry data tomorrow is forecast to show factories expanded at the weakest pace in six months.
Fallout from rising borrowing costs and declining home prices will hit the economy in full force in the fourth quarter as consumer spending fades, economists said. Waning demand may in turn prompt companies to scale back hiring and investment.
``As home prices continue to fall, consumers will spend less,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. ``Adding to consumer gloom, the labor market is starting to show signs of weakness.''
The unemployment rate is projected to increase from 4.6 percent in August. The rate reached a five-year low of 4.4 percent in March and October.
Employers probably added 97,500 workers to payrolls this month following a 4,000 drop in August that marked the first decline in four years, the Labor Department's report is also projected to show.
The seeming improvement in hiring will reflect a rebound in government payrolls after three consecutive decreases, economists said. Changes in the timing of summer holidays probably made it difficult for the Labor Department to count the number of teachers hired for the new school year.
`Timing Issue'
``This was only a timing issue and there will be either a big upward revision to August and/or a smart rebound in teaching jobs in September,'' said Steven Wood, president of Insight Economics LLC in Danville, California.
The Institute for Supply Management's factory index fell to 52.5, a six-month low, from 52.9 in August, the Tempe, Arizona- based group may report tomorrow. A reading greater than 50 signals expansion in manufacturing, which accounts for about 12 percent of gross domestic product.
Applied Micro Circuits Corp., which produces components for communications-equipment makers such as Cisco Systems Inc., plans to cut 4 percent of jobs through fiscal 2008, the Sunnyvale, California-based company said last week.
A report on Oct. 4 from the Commerce Department may show factory orders fell 2.6 percent in August after a 3.7 percent gain in July, the Bloomberg survey showed.
Auto Sales
The auto industry will probably be a source of weakness in orders and production in the second half of the year as sales cool following an August surge, economists said.
Purchases of cars and light trucks probably fell to a seasonally adjusted annual rate of 15.8 million in September, from a 16.3 million pace last month, based on the median estimate of economists surveyed by Bloomberg. Auto sales figures will be released Oct. 2.
Service industries may also start to feel the pinch from a more hesitant consumer. A second report from the Institute for Supply Management may show banks, builders, retailers and other service industries expanded last month at the slowest pace in six months. The group's report is scheduled for Oct. 3.
Economists say headwinds for the consumer are likely to grow stronger. A cooling job market and a jump in defaults among subprime borrowers have led banks to raise borrowing rates and made it more difficult to get loans. Home-price declines also mean fewer owners can tap into home equity loans.
Fewer Contracts
The number of Americans signing contracts to buy previously owned homes probably fell to a record low in August, a report Oct. 2 is forecast to show. The National Association of Realtors' index of signed purchase agreements, or pending home resales, fell 2.1 percent to 88, the lowest since record keeping began in 2001.
So far, income gains have helped keep consumer spending from collapsing. The Labor Department is forecast to report hourly wages grew 0.3 percent on average for a third straight month, based on the median estimate.
Consumer spending in the U.S. rose more than forecast in August, a report last week from the Commerce Department showed.
``The consumer hasn't yet pulled back, but the risk is that they will do so by the fourth quarter as the bad news coming out of the housing market takes hold of consumer psychology,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. ``Consumer confidence is pretty low right now.''
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
10/01 10:00 Sept. ISM Manufacturing 52.5 52.9
10/01 10:00 Sept. ISM Prices 62.3 63.0
10/02 10:00 Aug. Home Resales Pending -2.1% -12.2%
10/03 10:00 Sept. ISM Non-Manufacturing 54.8 55.8
10/04 8:30 9/22 Continuing Claims 2550K 2551K
10/04 8:30 9/29 Initial Jobless Claims 310K 298K
10/04 10:00 Aug. Factory Orders -2.6% 3.7%
10/05 8:30 Sept. Avg. Hourly Earnings 0.3% 0.3%
10/05 8:30 Sept. Change Nonfarm Jobs 97.5K -4K
10/05 8:30 Sept. Unemployment Rate 4.7% 4.6%
10/05 15:00 Aug. Consumer Credit $9.5B $7.5B
Last Updated: September 30, 2007 11:10 EDT
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