WASHINGTON (AP) — Signs of improvement in the U.S. economy emerged this week, and the jobs report the government will issue Friday will show whether that strength is fueling consistent hiring gains.
The August employment report will be the most significant economic data to be released before the Federal Reserve meets Sept. 17-18. Many economists expect the Fed to decide then to slow its monthly bond purchases.
Analysts predict a solid gain of 177,000 jobs for August, above total but just below the monthly average this year of 192,000. The unemployment rate is expected to remain 7.4 percent.
Many economists were encouraged by data released this week. Reports showed that services companies are stepping up hiring and that a dwindling number of people are losing jobs.
Americans are buying more cars than at any time since the recession began in December 2007. And U.S. factories expanded in August at their fastest pace in more than two years.
This year's steady job growth, along with declining layoffs, has helped lower the unemployment rate to 7.4 percent from 7.9 percent in January. It also means more Americans are earning paychecks and will likely boost consumer spending in coming months.
The improved jobs picture is a key reason most economists expect the Fed to scale back its bond buying. The Fed's $85 billion a month in Treasury and mortgage bond purchases have helped keep home-loan and other borrowing rates ultra-low to try to encourage consumers and businesses to borrow and spend more.
Chairman Ben Bernanke has said the Fed could begin slowing its bond purchases by year's end if the economy continues to strengthen and end the purchases by mid-2014. After its September policy meeting, the Fed will announce whether it will taper its monthly purchases and, if so, by how much.
The data released in the past week have bolstered the position of those Fed officials who argue that the economy is healthy enough to withstand tapering:
— U.S. services firms, which employ about 90 percent of the U.S. workforce, expanded last month at their fastest pace in nearly 8 years, according to a report Thursday from the Institute for Supply Management. Sales and new orders rose. Service companies also hired at the fastest pace in six months. The institute's index of service sector growth has jumped 5.8 points in the past two months to 58.6 — the biggest two-month increase since it began in 1997. Service firms include retailers, banks, construction companies and hotels.
— A four-week average of applications for U.S. unemployment benefits has fallen in the past month to its lowest point since October 2007 — two months before the Great Recession officially began. The trend shows that employers are laying off fewer and fewer workers.
— Survey results reported Thursday by payroll provider ADP found that American businesses added 176,000 jobs in August. That was just below the 198,000 added in July but close to the past year's average monthly gain.
— U.S. factories grew last month at their strongest pace in more than two years, according to the ISM's index of manufacturing growth. A measure of orders soared to its highest level since April 2011, a sign that factory output could grow further in coming months.
— Americans bought new cars in August at the fastest annual pace since November 2007, before the recession. Auto sales jumped 17 percent compared with a year earlier. Toyota, Ford, Nissan, Honda, Chrysler and General Motors all posted double-digit gains over last August.
Still, more than four years after the recession officially ended, the economy has a long way to go return to full health. The unemployment rate is well above the 5 percent to 6 percent range associated with a normal economy.
Many of the jobs created this year have been part-time positions in industries with generally low pay, such as hotels, retailers and restaurants. Such jobs leave consumers with less money to spend than do better-paying positions in industries such as manufacturing and construction, which have mostly shed jobs the past four months.
Businesses have also reduced spending on heavy machinery and other long-lasting factory goods. That caused orders to U.S. factories to fall in July by the most in four months, the Commerce Department said Thursday.
AP Retail Writer Anne D'Innocenzio contributed to this report from New York.
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