Jobs Report Will Test Economic Outlook
Business + Economy

Jobs Report Will Test Economic Outlook

After a string of disappointing reports on the economy in recent weeks, Friday will be an acid test on whether the recovery can endure, as the Labor Department releases its May unemployment report.

One of the few bright spots in the economic picture in the past three months has been solid and steady job creation by the private sector. Private employers added an average of more than 250,000 positions to their payrolls during that time.

Economists surveyed by Bloomberg expect employers to have added 170,000 jobs in May, compared with 244,000 in April. Forecasters also expect the unemployment rate to tick down, to 8.9 percent from 9 percent in April.

But some analysts are reconsidering and are now predicting even slower job creation. If the May jobs numbers disappoint — if job creation skids to fewer than 100,000 positions added — it would deflate any optimism that the economy is in a solid and self-sustaining expansion.

There are a slew of worrisome signs.

The Labor Department said Thursday that 422,000 people filed new claims for unemployment insurance benefits last week. While that was a notch down from the previous week’s 428,000, jobless claims have been above 400,000 for eight straight weeks, reversing a pattern of steady decline in the past few months.

Job creation slowed sharply last month at private businesses, according to ADP, the payroll processing company. Firms added about 38,000 positions, ADP reported Wednesday, compared with 179,000 jobs added in April.

The grim news reaches far beyond the job market. On Wednesday, a key index showed a drop in manufacturing to its lowest level since September 2009, according to the Institute for Supply Management’s survey of purchasing managers.

On Thursday, stocks dropped for the second day in a row, after the reports on jobless claims and retail sales. The Dow Industrial Average was down 0.6 percent, to 12,217 in midday trading. The Standard & Poor’s 500 was down 0.5 percent, to 1,308. Stocks had tumbled hard Wednesday, as the Dow dropped at its sharpest pace since June and S&P showed its steepest decline since August.

Over the course of 2011, many key areas of the economy have disappointed.

Consumer spending has been reined in by higher gasoline prices. (On Thursday, retailers reported only a slight uptick in sales for May as consumers cope with higher gas and food prices.)

The pace of business investment has weakened from last year, and the housing sector has been a disaster, declining steadily.

But against that troubling backdrop, there have been signs of strength.

Read more at The Washington Post.