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Employment boost in
U.S. a good sign


The U.S. economy probably added a quarter-million jobs this month, helping fuel the income growth that's needed to generate more spending, according to a survey of economists ahead of a Labor Department report Friday.

The projected rise follows a 248,000 increase in May and would bring to 1.4 million the number of jobs created this year. Payrolls have increased for nine months, leaving 1.3 million jobs lost since the last recession began in March 2001. The Labor Department might also report the jobless rate held at 5.6 percent.

"As you employ more people, those people go out and spend and it keeps the economy humming," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York. "The jobs numbers are a necessary ingredient for healthy, well-balanced expansion."

Federal Reserve policy-makers will bring an end Wednesday to the lowest interest rates since 1958 amid rising employment, more spending and early signs of accelerating inflation. A separate report Thursday from the Institute for Supply Management might show a gauge of manufacturing held close to a 20-year high this month, while the Commerce Department is forecast to report tomorrow that May personal spending rose the most since August.

A Bloomberg survey of 134 economists shows central bankers will boost the overnight rate by a quarter-point to 1.25 percent. The Fed has held the benchmark lending rate at 1 percent for the last year.

"They are going to move, and they are going to move 25 basis points," said Laurence Meyer, a former Fed governor, in an interview. "It's probably one of the most telegraphed moves in the history of central banking."

"One percent is close to free money," Rupkey said. "Once jobs and the labor market are back on track, the gloves are off for the Fed."

Friday's employment report will probably show a 30,000 increase in manufacturing jobs after the addition of 32,000 in May, according to the Bloomberg survey. Factory employment has increased every month since February.

Job growth is bolstering consumers' confidence. The Conference Board's measure of optimism about the economy probably rose to 95 in June from 93.2 in April, according to a survey of economists ahead of tomorrow's report.

"Where businesses will contribute most is that they're starting to hire," said William Zadrozny, chief executive officer of Siemens AG's Siemens Financial Services unit, in an interview from Iselin, New Jersey. "That will support consumer spending. We'll probably see growth of 4 percent to 4.5 percent" in the economy, he said.

Treasury Secretary John Snow told business leaders in Tampa Bay, Fla., on Friday that Wall Street forecasts of 200,000 to 300,000 new jobs a month are "reasonable."

The increased job growth has done little to help President Bush in public opinion polls, where Americans have signaled their unease about the conflict in Iraq. A June 21-23 poll by Cable News Network/USA Today/Gallup showed 54 percent of a sample of 521 adult respondents said sending U.S. troops into Iraq was a mistake. That's up from 41 percent in early June.

"The war in Iraq has sucked all the air out of the room," said Jennifer Duffy, an analyst at the nonpartisan Cook Political Report in Washington. "Voters are almost single-mindedly focused on it. Iraq will play a big role in the election, but it's a moving target."

A June 22-23 Fox News/Opinion Dynamics Poll of 900 registered voters found a more positive view of the war in Iraq. In that survey, 50 percent of respondents said the war "was the right thing for the United States to do." Forty-two percent said it was the wrong thing to do. The survey had a margin of error of plus or minus 3 percentage points.

The Institute for Supply Management will probably report its index of manufacturing slipped to 61.5 in June from 62.8. In January the gauge reached 63.6, the highest since December 1983. A reading above 50 signals expansion.

An index of Chicago-area business, which gives a clue about the strength of manufacturing nationwide, probably declined to 65 in June from 68. The level is higher than the 52.2 average of the last five years. Of the 10 largest U.S. counties, only Los Angeles has more manufacturing jobs than Cook County, which includes Chicago, according to the Labor Department.

The Commerce Department is forecast to report a 0.8 percent rise in personal spending for May. The increase, the largest since a 0.9 percent increase in August 2003, would follow April's 0.3 percent rise. The report might also show personal income increased 0.5 percent after a 0.6 percent rise in April.

Thursday, the Commerce Department might report that May construction spending increased 0.7 percent after a 1.3 percent surge, bolstered by home-building.

The government said Thursday that new home sales surged 14.8 percent in May to a record 1.369 million units at an annual rate.


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