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Us Jobs Data Improves As Goldman Raises Its Gdp Forecast

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Ahead of Friday’s all-important non-farm payroll data, which will show how many jobs were lost in July across the US economy, yesterday’s ADP private sector jobs survey showed that 371,000 jobs were lost last month, compared with 463,000 in June.

Although the total was a little higher than the 345,000 economists had been predicting, it was a welcome downward shift. A Reuters’ poll of analysts showed them expecting the numbers to show a loss of 320,000 public and private sector jobs.

However, the positive outlook was distinctly at odds with data from recruitment specialists Challenger, Gray & Christmas, which said that planned redundancies at American firms rose for the first time in six months in July, totalling 97,373, a 31pc increase from June.

The Challenger data was backed up by statistics later in the day from the Institute for Supply Management which showed that the service sector slowed at a faster pace in July than in June. The sector is important, as it represents approximately 80pc of US economic activity.

The ISM’s services index fell to 46.4 in July from 47 in June — anything below 50 represents a contraction.

“The pull-back in the services industry employment gauge is not a good omen for payroll employment in July,†said Brian Bethune, IHS Global Insight’s chief US financial economist. “The bottom-line here is that the path from recession to recovery should not be expected to be smooth and occasional setbacks should not be a surprise.â€

Despite uncertainty, Goldman Sachs chose yesterday to increase its gross domestic product (GDP) forecasts for the current year.

Jan Hatzius, Goldman’s chief US economist wrote: “We are boosting our near-term US economic outlook. Specifically, we are raising our forecast for real GDP growth in the second half of 2009 to 3pc from 1pc (at an annual rate), although we expect a return to below-trend growth in 2010â€.

Mr Hatzius and his colleagues based their decision on last week’s GDP numbers, the bigger-than-expected boost that the economy is receiving from various fiscal stimuli from the Obama administration, and a return in residential investment.

Goldman’s forecast follows a number of similar forecast upgrades from Wall Street rivals over the past week, with UBS predicting 2.5pc third-quarter growth, against 2pc earlier, and Wells Fargo 3pc against 2.2pc.

So GDP is up because of the stimulus when that runs out then what? Will we need more stimulus to keep the GDP figures positively.

The US clearly needs a return to growth because the baby boomers are about to retire.

So the worlds economy is now on a drip feed of stimulus and the money for all of this has come from where?

More la la land economics.

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