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U.S. hiring likely modest for 3rd straight month
Question of the Day
WASHINGTON (AP) — U.S. companies likely hired at a modest pace in May for the third straight month, underscoring the slow but steady nature of the recovery.
Economists forecast that employers added 158,000 jobs, according to a survey by FactSet. The unemployment rate is projected to remain 8.1 percent. The Labor Department will release the May employment report Friday at 8:30 a.m. Eastern time.
Job gains at that pace would be an improvement from the average 135,000 jobs per month added in April and March. But it would be slower than the pace set from December through February, when the economy added an average of 252,000 jobs per month.
Several reports Thursday suggested that hiring could be weaker than forecast. The number of people seeking unemployment benefits rose to a five-week high, a sign layoffs may have ticked up. And businesses added 133,000 jobs in May, according to a survey by payroll provider ADP. That was better than April’s figure but not by much.
“Greater anxiety about the outlook likely tempered firms’ willingness to hire in May,” Ellen Zentner, an economist at Nomura Securities, said.
The threat from Europe’s financial crisis has grown in recent weeks. The crisis is driving up borrowing costs for Spain and Italy and spreading to the banking system. Greece could be forced to exit the euro, which would likely push the region into a recession. That could limit U.S. growth.
Business confidence may be waning. Companies have cut their spending on capital goods such as computers and machinery for two straight months. And some regional surveys suggest the manufacturing sector is expanding at a slower pace.
Worries about Europe have weighed heavily on the stock market. The Dow Jones industrial average fell 820 points in May. It was the first losing month since September and the biggest monthly point loss since May 2010.
Surveys show the economy is the top issue on voters’ minds. Weaker growth and only modest job gains could give momentum to Mitt Romney, the Republican presidential challenger. Romney has made President Barack Obama’s handling of the economy the central theme in his campaign.
There are some signs that hiring may improve. Employers advertised 3.74 million job openings in March, the most since July 2008.
And the hiring numbers often end up better than what’s initially reported. The government revises the monthly figures twice. It has revised previous hiring gains higher by an average of 30,000 each month in the past year, according to economists at Deutsche Bank.
Other recent data have painted a mixed picture of the job market and economic growth.
The economy expanded at an annual rate of 1.9 percent in the first three months of this year, the Commerce Department said Thursday. That’s a slower pace than first estimated a month ago. Governments and consumers spent less and businesses rebuilt their stockpiles more slowly.
Economists expect growth may pick up a bit in the current quarter, to between 2 percent and 2.5 percent. Steady hiring and lower gas prices should give consumers more money to spend. Companies may also order more goods in order to rebuild their stockpiles.
Still, growth of 2.5 percent typically generates only enough jobs to keep pace with population changes. Most economists say it takes almost twice as much growth to boost hiring enough to lower the unemployment rate by 1 percentage point over a year.
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