Employers probably hired fewer workers in May, a sign U.S.businesses are losing confidence as the world's largest economycools, economists said before a report today.

Payrolls rose by 165,000, the smallest gain in four months,after increasing 244,000 in April, according to the median of 89estimates in a Bloomberg News survey. The jobless rate may havepartially reversed April's advance, falling to 8.9 percent from 9percent.

Companies may try to restrain labor costs amid concern consumerspending, which accounts for about 70 percent of the economy, willkeep slowing as households grapple with rising food and fuelexpenses. The recovery's failure to create more jobs raises theodds Federal Reserve policy makers will hold interest rates closeto zero into next year.

“The economy has slowed, and employment has slowed as well,”said Michael Feroli, chief U.S. economist at JPMorgan Chase &Co. in New York. Policy makers will “continue emphasizing thatthey'll keep interest rates on hold for a very long time.”

The Labor Department's data are due at 8:30 a.m. in Washington.Bloomberg payroll survey estimates ranged from increases of 65,000to 250,000.

Projections in the Bloomberg survey for the unemployment rateranged from 8.7 percent to 9.1 percent.

In addition to companies, investors may be losing confidence inthe speed of the economic expansion. The Standard & Poor's 500Index has dropped 3.7 percent since the end of April.

Broad-Based Slowdown

Private payrolls, which exclude government positions, grew175,000, according to the survey median. Manufacturing employmentgains probably slowed to 10,000 after a 29,000 increase in April,the figures may show.

Manufacturing grew in May at the slowest pace in more than ayear, according to Institute for Supply Management data this week,reinforcing concern the industry that led the U.S. recovery iscooling. Consumer spending grew less than forecast in April ashouseholds felt the pinch of grocery and energy costs, a CommerceDepartment report showed.

Economic growth slipped to a 1.8 percent annual pace in thefirst three months of the year from 3.1 percent in the priorquarter, revised figures from the Commerce Department showed lastweek.

Economists including Feroli said the wave of weak economic datamay spur Fed policy makers to support growth by making it clearafter their June meeting they're in no hurry to shrink the centralbank's record balance sheet. The Fed's second $600 billion round ofasset purchases ends this month, and it may keep reinvestingproceeds from maturing debt, they said. The Fed next meets June21-22.

Yellen's View

“The current accommodative stance of U.S. monetary policycontinues to be appropriate because the unemployment rate remainselevated and inflation is expected to remain subdued over themedium run,” Fed Vice Chairman Janet Yellen said in a Tokyo speechthis week.

Companies still reducing their workforce include H.J. Heinz Co.,the world's biggest ketchup maker, which in May announced plans toslash as many as 1,000 jobs worldwide and close five factories.Dean Foods Co., the largest U.S. milk processor, said it cut 600positions last quarter and 140 early this quarter.

At the same time, jobs are being created as some businessesexpand. General Electric Co.'s finance unit in May said it will add1,000 people to its Chicago-area operations, mostly new hires, ascommercial lending improves in the Americas. About 500 will behired in 2012, with another 500 over the next several years,Fairfield, Connecticut-based GE said. The company also announcedlast month that it will open a locomotive plant employing more than500 people in Fort Worth, Texas.

“Job creation remains the most important factor during theeconomic recovery, but we do anticipate that it's continuing toimprove,” Don Johnson, vice president of U.S. sales at GeneralMotors Co., said on a June 1 teleconference. “The environment forfuture hiring and investment does continue to be positive.”

Bloomberg News