Growth picks up in sign U.S. overcoming hurdles

Payroll Forecast

A Labor Department report in two days will show private payrolls, excluding government jobs, climbed 195,000 in July after a 202,000 increase a month earlier, according to the median estimate of economists surveyed by Bloomberg. Total employment rose by 185,000 following a 195,000 gain in June, the survey also showed. The jobless rate fell to 7.5%, matching a four-year low, from 7.6% in June, economists projected.

“If the unemployment rate keeps falling as we expect, the Fed will be tapering and cutting back on asset purchases starting in September,” said Dean Maki, the New York-based chief U.S. economist for Barclays Plc and a former Fed economist. “The fact that the Q2 momentum was a little better than expected may be seen by the Fed as consistent with their second-half forecast.”

In their last meeting in June, Fed policy makers projected the economy will have grown between 2.3% to 2.6% in this year’s fourth quarter from the same time in 2012. It would take a 3.2% annualized gain on average in the last six months of the year to meet their minimum projection, according to Bloomberg calculations.

German Unemployment

The job market is also improving among some U.S. trading partners as data from Germany today showed the country’s unemployment rate in July held near a two-year low even as the rate in the euro area stayed at a record high.

The median forecast of 85 economists surveyed by Bloomberg projected U.S. GDP would advance at a 1% pace last quarter. Estimates ranged from a 0.1% drop to a 1.8% increase. The reading is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available.

Business activity in the U.S. expanded in July, adding to signs that a recovery in manufacturing will support economic growth, another report signaled today. The MNI Chicago Report’s business barometer increased to 52.3 from 51.6 in June. A reading above 50 signals expansion.

Comprehensive Revisions

The Commerce Department also issued comprehensive revisions with today’s report that showed the recovery from the worst U.S. recession in the post-World War II era has been stronger than previously estimated. It’s also been more uneven. The updates affected data back to 1929.

GDP expanded 1.4% in the second quarter from the same time in 2012 compared with a 1.3% year-to-year gain in the previous three months, today’s report showed.

Consumer spending climbed 1.8%, also more than projected, after increasing 2.3% in the first three months of the year. The gain in household consumption, which accounts for about 70% of the economy, compared with a 1.6% median forecast in the Bloomberg survey. Purchases added 1.2 percentage points to growth.

Some of the slowdown last quarter may have been the lingering effect of the increase in the payroll tax, which reverted to its 2010 rate of 6.2% in January after holding at 4.2% for two years, resulting in lower take- home pay.

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