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Sales at U.S. retailers unexpectedly fell in July, raising the risk that consumers will keep cutting back as job losses mount and temper a recovery from the worst recession since the 1930s.

Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.

A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.

“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.66 percent at 11:40 a.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese yen to 95.47 yen from 96.06 on Aug. 12. Stocks were little changed.

More Claims

The Labor Department said today that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before.

Retail sales were projected to rise 0.8 percent, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from a decline of 0.9 percent to a gain of 2 percent. Commerce revised June sales up to show a gain of 0.8 percent from the 0.6 percent increase previously reported.

Excluding automobiles, sales fell 0.6 percent, also worse than anticipated and the biggest drop since March. They were forecast to increase 0.1 percent, according to the survey.

Americans cut back on furniture, electronics, building materials, groceries and sporting goods in July, according to the report. The drop in sales at department stores, at 1.6 percent, was the biggest this year.

‘In the Tank’

“It’s hard to find anything encouraging in this report,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “For the most part, discretionary spending is in the tank.”

Walmart, the world’s largest retailer, today reported profit that exceeded some analysts’ estimates after managing inventory to lower costs fast cash. Comparable-store sales trailed the company’s forecast.

The drop in sales was attributable to consumers being “more selective” in buying discretionary items and to larger declines in grocery prices than anticipated, Eduardo Castro- Wright, Walmart’s U.S. stores chief, said on a recorded call.

Macy’s, the second-biggest U.S. department store chain, said yesterday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped.

Other reports today showed companies trimmed inventories in June for a 10th consecutive month, and prices of imported goods dropped in July for the first time in six months as the cost of commodities such as petroleum and chemicals decreased.

Cash for Clunkers

Figures from the retail sales report showed the government’s cash-for-clunkers plan did boost auto purchases, confirming industry data released earlier this month. Sales at dealerships and parts stores climbed 2.4 percent last month, the biggest gain since January.

The government is offering credits of up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles. President Barack Obama last week signed into law an emergency measure giving an additional $2 billion to the program after the original $1 billion ran out three months earlier than projected. The infusion of funds was meant to extend the program through August.

Excluding autos, gasoline and building materials — the retail group the government uses to calculate gross domestic product figures for consumer spending — sales dropped 0.2 percent after no change in June. The government uses data from other sources to calculate the contribution from the three categories excluded.

Forecasts Trimmed

After the report, economists at Morgan Stanley in New York projected the economy will expand at a 3.7 percent annual pace this quarter, down from a prior estimate of 4.2 percent.

The economy has lost about 6.7 million jobs since the recession started in December 2007, the worst of any downturn since World War II. GDP contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.

Federal Reserve policy makers yesterday said they will hold the benchmark interest rate “exceptionally low” for an “extended period” to help sustain a recovery. They also added “sluggish income growth” to the list of reasons why household spending is likely to be slow to rebound. Headwinds previously mentioned included job losses, tight credit and falling home values.

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The productivity of U.S. workers grew in the second quarter at the fastest pace in almost six years as employers squeezed more out of remaining staff to bolster profits.

Productivity, a measure of how much an employee produces for each hour worked, rose at an annual 6.4 percent pace, more than forecast, after a 0.3 percent gain the prior three months, Labor Department data showed today in Washington. Labor costs fell by the most in eight years.

Lower expenses mean companies may need to fire fewer workers as sales stabilize, the first step toward ending the worst employment slump in the post World War II era. Efficiency gains also help curb inflation, giving Federal Reserve policy makers, meeting today and tomorrow, extra time to remove stimulus.

“This is good for the cost structure of companies,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. In New York. ‘The Fed will be encouraged on the inflation story. They have taken a lot of heat on the exit strategy. Certainly there is no rush to exit.”

Stock index futures trimmed losses and Treasury securities gained after the report indicated labor costs will not contribute to inflation. The contract on the Standard & Poor’s 500 index was down 0.2 percent 1,005.2 at 8:43 a.m. in New York. The yield on the benchmark 10-year note fell to 3.77 percent from 3.78 percent late yesterday.

Lower Costs

Labor costs decreased at a 5.8 percent pace, the second consecutive drop and the biggest since 2001. Expenses were down 0.6 percent over the last four quarters, the biggest fall in five years.

Economists had forecast productivity would rise at a 5.5 percent annual pace, according to the median of 62 forecasts in a Bloomberg News survey. Estimates ranged from increases of 7 percent to 2.9 percent. Unit labor costs, which are adjusted for efficiency gains, were projected to drop 2.5 percent.

Compared with the second quarter of 2008, productivity was up 1.8 percent, the most in a year.

Hours worked fell at a 7.6 percent pace, after a 9 percent drop. Output fell at a 1.7 percent rate.

Compensation

Compensation for each hour worked climbed at 0.2 percent annual pace, compared with a decline of 2.4 percent in the prior quarter.

Among manufacturers, productivity jumped at a 5.3 percent pace, compared with a 2.6 percent decrease.

A Labor report last week showed payrolls fell by 247,000 in July after a 443,000 drop in June, in a sign job losses are already starting to slow payday loans. The economy has lost 6.7 million jobs since the recession began in December 2007.

Smaller workforces have helped stem the slump in profits. For the second quarter, 72.2 percent of S&P 500 companies beat consensus earnings estimates, just below the 72.3 percent ratio five years ago that was the highest since at least 1993, data compiled by Bloomberg showed as of yesterday.

Investors are getting encouraged by the improvement. The Standard & Poor’s 500 index rose in each of the last four weeks, leaving it trading at the highest level relative to earnings since 2004.

DuPont Co., the third-biggest U.S. chemical maker, was one of the companies that posted second-quarter profit that topped analysts’ estimates as it trimmed expenses faster than expected. Wilmington, Delaware-based DuPont is cutting fixed costs by $1 billion, in part by shedding 2,500 employees and more than 10,000 contractors, and has achieved 60 percent of its cost- reduction target.

Cutting Payrolls

“Our aggressive actions to improve productivity and reduce costs across the company are paying off,” Chief Executive Officer Ellen Kullman said in a statement last month.

Some companies are already bringing employees back as demand stabilizes. Union Pacific Corp., the second biggest U.S. railroad by sales, trimmed payroll by operating with about 45,000 workers in the second quarter, its lowest employment since its 1996 purchase of Southern Pacific Rail Corp.

Omaha, Nebraska-based Union Pacific, whose profit also beat analysts’ estimates, has recalled some furloughed workers since June as weekly carload rates gain. About 900 of the 5,300 conductors, engineers and other employees laid off as of mid- June have returned, a spokesman said in July.

Rising productivity may help Fed officials build a case for keeping the benchmark lending rate close to zero for a long period of time. In addition to cutting rates, Fed policy makers injected billions of dollars to unclog the financial system after lenders clamped down on credit.

In the 1990s, former Fed Chairman Alan Greenspan was one of the first to recognize productivity was accelerating because of the increased use of computers and the Internet, and that the improvement would contain inflation even as the economy gained strength and unemployment stayed low. The realization allowed the Fed to keep interest rates little changed from 1996 to 1999.

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Japanese machinery orders rose for the first time in four months in June and the current-account surplus widened, the latest signs that the nation’s worst postwar recession is easing.

Orders climbed 9.7 percent from May, the Cabinet Office said today in Tokyo, more than the 2.6 percent expected by economists. The surplus more than doubled from a year earlier to 1.15 trillion yen ($11.8 billion), expanding for the first time since February 2008 as exports improved.

The Nikkei 225 Stock Average advanced, extending its rally in the past month to 13 percent as the global recession abated and cost cuts helped earnings at companies from Honda Motor Co. to Sony Corp. exceed analysts’ expectations. Even so, a separate report showed corporate bankruptcies increased in July, signaling unemployment may soon rise to a postwar high.

“We shouldn’t be too optimistic about capital spending yet,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Companies are still burdened with excess labor and capacity and the outlook for the economy is uncertain.”

The Nikkei rose 1.1 percent, its highest close since Oct. 3. The yield on 10-year government bonds rose 2.5 basis points to a seven-week high of 1.455 percent. The yen traded at 97.25 per dollar at 3:26 p.m. in Tokyo from 97.39 before the machinery report.

Election This Month

Prime Minister Taro Aso is struggling to steer the economy toward a recovery as his ruling Liberal Democratic Party trails the opposition Democratic Party of Japan in polls ahead of an Aug. 30 election. A separate report today showed sentiment at merchants rose to a 22-month high, bolstered by the stock- market gains and Aso’s 25 trillion yen in stimulus spending.

Machine orders, an indicator of capital investment in the next three to six months, will fall 8.6 percent in the current quarter, the government said. June’s gain was mostly due to a purchase of equipment used to generate nuclear power. Without that, orders would have risen about 2 percent or 3 percent, said Shigeru Sugihara, head of statistics at the Cabinet Office.

Today’s figures add to signs the global economy is recovering from the worst recession since the Great Depression. The U.S. unemployment rate dropped for the first time in 15 months in July, prompting Nobel Prize-winning economist Paul Krugman to say yesterday that the economy “may be in the beginning of an upturn.” Analysts expect data next week will show the European economy shrank at a slower pace last quarter.

Global Stimulus

More than $2 trillion in spending by governments worldwide has stabilized global demand, helping Japanese manufacturers such as Kubota Corp online payday loans., which is selling more farming equipment in China. Japan’s factory production rose 8.3 percent last quarter, rebounding from a record 22.1 percent plunge in the previous period.

The current-account surplus rose 144 percent in June from a year ago, the Finance Ministry said. Exports fell 37 percent, less than the 42.2 percent in May. Imports slid 43.8 percent.

The world’s second-largest economy probably grew for the first time in a year last quarter, expanding at an annualized 3.8 percent pace after a record 14.2 percent contraction in the first quarter, according to the median estimate of 20 analysts.

Companies have raised earnings predictions and beaten analysts’ expectations over the past month. Some 15 percent of firms listed on the first section of the Tokyo Stock Exchange raised first-half earnings estimates since June, according to Tokyo-based Shinko Research, while 10 percent cut projections.

Honda, Sony

Honda Motor, Japan’s second-largest carmaker, last month reported net income of 7.5 billion yen in the quarter ended June 30, compared with a 40 billion yen loss forecast by analysts. Sony posted a net loss of 37.1 billion yen, half the 80 billion yen shortfall analysts predicted.

“The worst is definitely over in terms of earnings, but the incentive to invest is very limited in a world in which production levels are so low,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo.

Toyota Motor Corp. last week narrowed its loss forecast for the current business year, citing government incentives introduced in Japan, the U.S. and Europe to encourage car- buying. The company still estimates it will sell 3 million fewer cars than it has the capacity to build. The automaker plans to cut capital spending 36 percent this year.

Smaller firms are struggling to get access to cash that would keep them in business. Corporate bankruptcies climbed 1.02 percent in July from a year earlier to 1,386 cases, Tokyo Shoko Research Ltd. said in Tokyo today.

“Financial conditions aren’t stable yet on the whole,” said Masayuki Kichikawa, chief Japan economist at Merrill Lynch & Co. in Tokyo. “Corporate funding is improving among large companies, but not yet at small businesses.”

Kichikawa said the increase in business failures puts pressure on the unemployment rate, which climbed to a six-year high of 5.4 percent in June, close to a record 5.5 percent.

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The pace of U.S. job losses slowed more than forecast last month and the unemployment rate dropped for the first time in more than a year, the clearest signs yet that the worst slump since the Great Depression may be ending.

Payrolls fell by 247,000, after a 443,000 loss in June, the Labor Department said yesterday in Washington. The jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent.

The figures sent stock indexes soaring to their highs for the year and 10-year Treasuries to their worst week since 2003. At the same time, the White House warned the jobless rate is still likely to reach 10 percent, and with companies from Boeing Co. to Verizon Communications Inc. continuing to cut costs, any rebound in hiring may not come until 2010.

“History will be written that the recession ended in the summer of 2009,” Alan Blinder, an economics professor at Princeton University, said in a Bloomberg Television interview yesterday. Blinder, vice chairman of the Federal Reserve from 1994 to 1996, added that while “we’re past the bottom” in terms of economic contraction, in employment “we’re still going downhill, but downhill at a slower rate.”

The Standard & Poor’s 500 Stock Index closed up 1.3 percent at a 10-month high of 1,010.48 yesterday in New York. The yield on the benchmark 10-year note climbed to 3.85 percent from 3.75 percent the prior day. The dollar climbed 1.2 percent to $1.4178 per euro and 2.2 percent to 97.53 yen.

Obama Comments

President Barack Obama, speaking at the White House hours after the jobs report, said the unemployment numbers indicate “the worst may be behind us” for the recession.

Revisions added 43,000 to payrolls previously reported for June and May. The average losses of 331,000 in the past three months are less than half the pace of decline in the first quarter of this year.

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 recession.

Jeffrey Frankel, who sits on the National Bureau of Economic Research’s business-cycle dating committee, said the report indicates the recession may have ended in July as the labor market improved.

“I haven’t felt that there have been any previous months for saying this will turn out to be the bottom, but this one is definitely a candidate,” Frankel said yesterday by telephone.

Forecasts

Payrolls were forecast to drop 325,000, according to the median of 82 estimates in a Bloomberg News survey. Job losses peaked at 741,000 in January, the most since 1949.

The jobless rate was projected to rise to 9.6 percent. A separate Bloomberg survey in July showed the rate may top 10 percent by early next year and average 9 free credit report and score.8 percent for all of 2010.

Factory payrolls fell 52,000, the fewest in a year, after decreasing 131,000 in the prior month. That drop came even as the automobile industry added 28,200 jobs. The improvement in auto payrolls reflected the return of workers at General Motors Co. and Chrysler Group LLC, which have exited bankruptcy.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers after losing 220,000 in June. Retail payrolls fell by 44,100.

Government payrolls rose by 7,000 after falling 48,000.

The average work week grew to 33.1 hours in July from 33 hours in June. Average weekly hours worked by production workers increased to 39.8 hours, while overtime held at 2.9 hours. That brought the average weekly earnings up to $614.34.

Workers’ average hourly wages rose 0.2 percent to $18.56 from June, and climbed 2.5 percent from July 2008.

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 Aug. 4.

Companies like Verizon and Boeing are still trimming expenses. New York-based telephone carrier Verizon last month said it may slash more than 8,000 jobs in the second half.

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 July 28.

‘Challenging Times’

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.

“Emerson is still seeing very difficult and challenging times around the world,” Chief Executive Officer David Farr said on an Aug. 4 conference call.

Administration officials including Lawrence Summers, director of the White House National Economic Council, predict most new jobs resulting from Obama’s stimulus program will come only in 2010.

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.

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Manufacturing in the U.S. shrank less than forecast as stimulus-induced gains in demand worldwide helped resuscitate factories from the worst slump in three decades.

The Institute for Supply Management’s factory gauge rose to an 11-month high of 48.9 in July, according to the Tempe, Arizona, group. Readings below 50 signal contraction. A report from the Commerce Department showed June building projects climbed 0.3 percent, helped by higher public spending.

Factory gauges around the world showed advances for July, indicating government programs from Washington to Beijing aimed at reviving demand are starting to take hold. Stocks climbed, while Treasury securities and the dollar sank, as investor demand for riskier assets increased.

“The recession is coming to an end,” said Conrad DeQuadros, senior economist at RDQ Economics in New York. “It does look like the second half of the year is turning out to be better than we thought.”

The Standard & Poor’s 500 Stock Index gained 1.5 percent to close at 1,002.63 today in New York, the first time the index has passed 1,000 since November. Yields on benchmark 10-year notes jumped to 3.63 percent from 3.48 percent at last week’s close, and the dollar dropped to the lowest against the currencies of six major trading partners since the weeks after Lehman Brothers Holdings Inc. went bankrupt.

Global Improvement

Another purchasing managers’ index showed manufacturing in China expanded, rising to the highest level in a year. Reports today also showed manufacturing expanded in the U.K. for the first time in more than a year, shrank less in Europe than initially estimated and declined at a slower pace in Australia.

Economists forecast the ISM gauge would rise to 46.5 from 44.8 in June, according to the median of 77 forecasts in a Bloomberg News survey. Estimates ranged from 44.1 to 49.

The readings for new orders and production jumped to the highest level in more than two years, today’s report showed. A measure of exports showed the first expansion in overseas demand since September.

“The wheels of the economic train have stopped moving in reverse and are starting to grind forward,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “We’re starting to see a pickup in production, partly due to the turn in residential construction” and also in the automobile industry, he said.

Auto Sales

The factory slump is abating following record reductions in inventories, smaller cutbacks in business investment and an end to the slump in homebuilding. The federal “cash-for-clunkers” program is also boosting demand for cars.

Ford Motor Co. said today sales rose 2.3 percent in July, its first monthly gain since 2007 business card. Total purchases for the industry jumped to an 11.3 million annual pace last month, the highest level since September.

The government’s program, which offers as much as $4,500 for trading in older, less fuel-efficient vehicles, ran through the $1 billion available in about a week, and Congress is considering $2 billion more.

Companies such as Motorola Inc., Caterpillar Inc. and Dow Chemical Co. reported better-than-estimated earnings over the last couple of weeks.

Rockwell Collins Inc., an aircraft-parts producer based in Cedar Rapids, Iowa, last week maintained its forecast for the year and said a drop in business-jet sales appears to be nearing a bottom.

Less ‘Bad News’

“We’re starting to see some stabilization and a relative decrease in the flow of bad news,” Chief Executive Officer Clay Jones said on a conference call July 30.

Dow Chemical, the largest U.S. chemical maker, last week posted second-quarter profit that topped analysts’ estimates as demand improved from earlier in the year.

“The United States economy has found bottom, but will be slow in recovering as unemployment continues to be a drag on consumer spending,” Chief Executive Officer Andrew Liveris said in a July 30 statement.

The economy shrank at a 1 percent annual pace in the second quarter, less than forecast, figures from the Commerce Department July 31 showed, helped by a jump in government spending that masked a deeper retrenchment by consumers.

Consumer spending, which accounts for about 70 percent of the economy, fell at a 1.2 percent pace following a 0.6 percent increase in the prior quarter. Purchases slid 2 percent since the peak at their end of 2007 — the most since the 1980 recession.

Homebuilding, Stimulus

The Commerce construction report showed private residential projects rose for the second time in three months and spending by the federal government increased by the most this year.

Spending on infrastructure projects is likely to keep rising in coming months as state and local governments use funds from the $787 billion fiscal stimulus package. In addition, lower home prices and mortgage rates are beginning to boost sales, spurring residential construction and bringing an end to the worst housing slump in seven decades.

“The huge drag from residential construction will probably go away in the third quarter and that’ll provide a general lift to the economy,” said IHS Global Insight’s Bethune. “There’s no question that the fiscal stimulus is helping on the non- residential side.”

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Employers cut jobs in July at a slower pace and the factory slump eased, indicating the end of the worst U.S. recession since the Great Depression is getting closer, economists said before reports this week.

Payrolls fell by 325,000 workers after dropping by 467,000 in June, according to the median on 56 estimates in a Bloomberg News survey ahead of an Aug. 7 Labor Department report. The jobless rate probably rose to a 26-year high of 9.6 percent.

The figures will be a reminder that, even as Obama administration stimulus efforts gain traction, hiring will take longer to pick up as companies such as Deere & Co. and US Airways Group Inc. continue to cut costs. Estimates that the jobless rate will exceed 10 percent by early 2010 signal consumer spending will lag behind an economic recovery.

“The labor market will remain a headwind,” said Conrad DeQuadros, senior economist and a partner at RDQ Economics in New York. “The pace of layoffs has slowed, but that’s not enough. Given an environment where growth is likely to be extremely sluggish, unemployment will still go higher.”

The U.S. has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era. June’s unemployment rate of 9.5 percent was the highest since 1983.

Households see few signs the job market will improve. Tempe, Arizona-based US Airways said last month it will cut 600 jobs after the peak summer travel season ends in September. Moline, Illinois-based Deere, the world’s largest maker of agricultural equipment, said about 800 salaried employees will leave as part of a voluntary program.

Fewer Paychecks

Automatic Data Processing Inc., the world’s largest payroll processor, last week forecast full-year sales and profit that trailed analysts’ projections as the recession curbed customers’ spending. It gets about three-quarters of its sales from paycheck, tax and benefits processing.

“Our guidance reflects the uncertainty about the depth and length of the downturn,” Chief Financial Officer Chris Reidy said in an interview on July 30. “The pipeline of activity has picked up significantly, but CEOs and CFOs are still hesitant to make these investments.”

A report last week from the Commerce Department underscored estimates that the economy will pick up this quarter. Gross domestic product shrank at a 1 percent annual pace from April to June, less than forecast, after plunging 6 cash advance.4 percent the prior three months.

Obama on Jobs

“We are still continuing to lose far too many jobs,” President Barack Obama said in a news conference on July 31 following the GDP release. “As far as I’m concerned, we won’t have a recovery as long as we keep losing jobs,” he said, and added that a rebound in hiring “won’t happen overnight.”

A record reduction in inventories over the first half of the year sets the stage for production to rebound, economists said. Companies including General Motors Co. and Chrysler Group LLC, both out of bankruptcy, may benefit from higher sales and a boost to output from the government’s “cash for clunkers” effort.

The House of Representatives on July 31 approved an emergency measure to add $2 billion to the automobile purchase program after a burst of demand exhausted most of the initial $1 billion in less than a week.

Sales figures from the auto industry are due tomorrow. Increasing demand will contribute to the stabilization in manufacturing already taking place.

Manufacturing, Services

The Institute for Supply Management may report tomorrow that its manufacturing index climbed to 46.5 in July, the highest level in almost year, according to the Bloomberg survey median. Readings below 50 signal contraction.

The slump in service industries, which make up almost 90 percent of the economy, is also waning. The Tempe, Arizona-based ISM’s gauge of non-manufacturing businesses probably increased to 48 last month from 47 in June, according to the Bloomberg survey. The report is due on Aug. 5.

The GDP report last week showed consumer spending, which makes up about 70 percent of the economy, has dropped 2 percent since it peaked at the end of 2007 — the most since the 1980 recession. A Commerce report on June 4 will give the month-by- month breakdown on spending and incomes for the quarter.

Economists project the economy will grow at an average 1.5 percent pace from July to December, according to a Bloomberg survey taken in early July. The survey also showed they forecast the jobless rate will reach 10.1 percent in the first quarter of 2010.

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