The jobs tally in June probably crowned the weakest quarter for employment in more than two years, evidence the U.S. recovery has lost momentum, economists said before reports this week.
Employers increased payrolls by 90,000 workers last month after a 69,000 gain in May, according to the median forecast of 59 economists surveyed by Bloomberg News ahead of Labor Department figures due July 6. Excluding government agencies, private hiring may have climbed by 100,000, concluding the smallest quarterly advance since the first three months of 2010.
The job slump has shaken confidence and stalled household spending, which accounts for about 70 percent of the economy, making the expansion more susceptible to any fallout from the European debt crisis. Slowing consumer and global demand is also leading to a cooling in manufacturing, a mainstay of the recovery, another report this week may show.
“We really need to see job creation pick up, which is the only thing that’s going to get households spending on a sustained basis,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in London. “The economy isn’t going to get exceptionally weak from here, but neither is it going to get much stronger.”
The unemployment rate, derived from a separate Labor Department survey of households, probably held at 8.2 percent, the economists predicted. Joblessness has exceeded 8 percent since February 2009, the longest stretch in monthly records dating to 1948.
The expansion has lost luster. Gross domestic product rose at a 1.9 percent annual rate in the first quarter following a 3 percent rate in the prior three months, Commerce Department data showed last week. While household spending underpinned last quarter’s gain, incomes stretched by weak job creation will probably limit growth prospects.
Stronger economic growth and diminished joblessness would bolster President Barack Obama’s re-election prospects as November draws nearer. Obama attributed the weakness in job growth in May primarily to European governments’ inadequate response to the continent’s debt crisis, saying “our biggest challenge is not here in the U.S. but the economy overseas.” Republican candidate Mitt Romney said Obama “is always quick to find someone to blame” for the struggling economy.
Stocks surged on June 29, capping the biggest June gain since 1999, after European leaders reached an agreement that alleviated concern banks will fail. The Standard & Poor’s 500 Index climbed 4 percent last month.
Manufacturing may also offer less support to the economy as domestic and global demand fades. The Institute for Supply Management Inc.’s factory index fell to 52 in June, the lowest level in eight months, from 53.5 the prior month, according to the Bloomberg survey median ahead of a report tomorrow. A reading greater than 50 signals expansion.
The purchasing managers group’s services index, which covers almost 90 percent of the economy, fell to 53 last month from 53.7 in May, a report on July 5 may show according to economists surveyed.
To spur a faster expansion and lower unemployment, Federal Reserve policy makers announced on June 20 they would buy securities to extend the maturities of assets on the bank’s balance sheet, thereby lowering longer-term interest rates.
They also lifted forecasts for joblessness, anticipating the unemployment rate will average 8 percent to 8.2 percent in the fourth quarter of this year versus an April estimate of 7.8 percent to 8 percent.
“There is a lot of uncertainty in almost all markets today caused by low growth rates and high unemployment in the U.S. and slower or no growth globally,” Joseph Pyne, chairman and chief executive officer of Kirby Corp., said during a June 25 call with analysts. Shares have slumped 7.9 percent since the shipping company cuts its earnings forecast that week.