By Shobhana Chandra Aug. 7 (Bloomberg) -- The pace of U.S. job losses slowed more than expected last month and the unemployment rate dropped for the first time since April 2008, the clearest sign yet that the worst recession since the Great Depression is easing. Payrolls fell by 247,000, after a 443,000 loss in June, the Labor Department said today in Washington. The jobless rate dropped to 9.4 percent from 9.5 percent. Companies from Boeing Co. to Verizon Communications Inc. continue to cut costs, signaling that a rebound in hiring will take time to develop even as Obama administration stimulus efforts take hold. A jobless rate that is projected to exceed 10 percent by early 2010, stagnant wages and falling home values mean a lack of consumer spending will curb an economic recovery. “We have in motion a turnaround in the labor market,” James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “For a sustained pickup in consumption, we need a sustained improvement in the job market, and hopefully, that’s in process now.” Revisions added 43,000 from payroll figures previously reported for June and May. The latest numbers brought total jobs lost since the recession began in December 2007 to about 6.7 million, the biggest decline in any post-World War II economic slump. Payrolls were forecast to drop 325,000 after a 467,000 decline initially reported for June, according to the median of 82 economists surveyed by Bloomberg News. Estimates ranged from decreases of 150,000 to 460,000. Job losses peaked at 741,000 in January, the most since 1949. Factory Payrolls The jobless rate was projected to rise to 9.6 percent from 9.5 percent. Forecasts ranged from 9.2 percent to 9.8 percent. A separate Bloomberg survey last month showed unemployment may exceed 10 percent by early next year and average 9.8 percent for all of 2010. Today’s report showed factory payrolls fell 52,000, the fewest in a year, after decreasing 131,000 in the prior month. Economists forecast a drop of 100,000. The drop came even as 28,200 jobs were created in the auto manufacturing and parts industries. The improvement reflected the return of workers at automakers General Motors Co. and Chrysler Group LLC, both of which have exited bankruptcy. GM may have to cut more U.S. hourly jobs after an offer of buyouts and early retirements fell about 7,500 workers short of the reorganized automaker’s target. Payrolls at builders fell 76,000 after decreasing 86,000. Financial firms decreased payrolls by 13,000. Service Industries Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers after losing 220,000 the month before. Retail payrolls decreased by 44,100. Government payrolls increased by 7,000 after falling 48,000 the prior month. Today’s report also showed the average work week expanded to 33.1 hours in July from 33 hours in the prior month. Average weekly hours worked by production workers increased to 39.8 hours from 39.5 hours, while overtime held at 2.9 hours for a second month. That brought the average weekly earnings up to $614.34 from $611.49. Workers’ average hourly wages rose 3 cents, or 0.2 percent, to $18.56 from the prior month. Hourly earnings were 2.5 percent higher than July 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.5 percent gain for the 12-month period. Consumer Spending Even so, economists predict consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued this week. Companies like Verizon and Boeing are still looking to trim expenses through cutbacks in staff. New York-based telephone carrier Verizon last month said it plans to slash more than 8,000 jobs in the second half of the year. Chicago-based Boeing, which is planning to eliminate about 10,000 workers, or 6 percent of its labor force, has agreed to allow some machinists to volunteer for a “layoff with benefits” to help mitigate job cuts, the International Association of Machinists and Aerospace Workers said on July 28. Emerson Electric Co., a maker of industrial equipment, will cut an additional 5,000 to 6,000 positions in the next few quarters, after it posted its third straight drop in quarterly earnings, the longest stretch since 2002. The St. Louis-based company has already eliminated 20,000 jobs. ‘Very Difficult’ “Emerson is still seeing very difficult and challenging times around the world,” Chief Executive Officer David Farr said on a conference call on Aug. 4. Administration officials including Lawrence Summers, director of the White House National Economic Council, predict most new jobs under President Barack Obama’s stimulus program will come only in 2010. Less than 10 percent of the $787 billion plan goes to job creation this year, and the government still expects to save or create at least 3 million jobs, Summers said in an NBC television interview on Aug. 2. The unemployment rate may not peak until the second half of 2010, Treasury Secretary Timothy Geithner said on ABC last week, even as the economy shows signs of improvement. Another extension in unemployment benefits “is something that the administration and Congress are going to look very carefully at as we get closer to the end of this year,” Geithner said. To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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