Economic growth will ease this quarter to a 1.7% annualized rate, according to the median forecast of economists in a Bloomberg survey. The second half will show improvement, with GDP projected to climb 2.2% in the third quarter and 2.6% in the fourth quarter.
The economy has “weathered political storms like the fiscal cliff, the Eurozone crisis and the slowdown in China, and all of these point to a fairly sustainable and solid recovery,” Brian Jacobsen, who helps oversee $221.2 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said before today’s Beige Book report. “We’re still adding jobs but it’s just not a lot of jobs. There aren’t as many as we’d like to see.”
Companies in the U.S. boosted employment by 135,000 workers in May, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 165,000.
A Labor Department report in two days may show that total employment, including government workers, rose by 165,000 in May, based on the median estimate of 86 economists in a Bloomberg survey. That’s the same as the gain in April.
Government spending reductions known as sequestration, which began in March, and a payroll-tax increase at the start of the year may slow growth this quarter, putting a damper on hiring as businesses assess the damage.
The increase in the payroll tax is slowing sales at Minneapolis-based Target Corp., the second-largest U.S. discount retailer, where about a third of sales come from customers who earn less than $50,000 a year, according to John Mulligan, the firm’s chief financial officer.
“The payroll tax increase had a significant impact on them,” Mulligan said in a May 30 presentation. “They were struggling before. They’re struggling now. And we continue to see that in our business.”