Job growth seen stepping up in May
WASHINGTON (Reuters) - Jobs growth probably snapped back in May from weather-related distortions that had slowed hiring, suggesting the economy was still expanding moderately despite strong headwinds from Europe.
Employers probably created 150,000 jobs last month, according to a Reuters survey of economists, after generating a paltry 115,000 positions in April - the fewest in six months.
That would bring nonfarm employment growth closer to its 176,000 a month average of the past three months and temper fears that economic activity could be stagnating.
"The labor market is getting better, but the glass is still half empty. I think a big part of the weather and seasonal issues that have been weighing on the jobs numbers is now behind us," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
Unseasonably warm weather brought forward hiring into the winter months, causing the labor market's recovery to take a step back in March and April.
If the forecasts are accurate, the government's jobs report on Friday could shore up confidence that has been shaken by a raft of soft regional factory surveys and a worsening of the debt crisis in Europe.
Economists have blamed Europe's prolonged financial crisis and slowing Chinese growth for sluggish U.S. factory activity in May, which has evoked among investors memories of the slackening of job growth in the summer of 2011 when the U.S. recovery nearly stalled.
That fear has pushed the yield on the 10-year U.S. Treasury note to a record low, while punishing stocks. The Standard & Poor's 500 index shed 6 percent of its value in May.
The anticipated job gains would be consistent with economic growth of between a 2 percent and 2.5 percent annual rate. U.S. GDP grew at a 1.9 percent pace in the first quarter.
While the rise in employment would still be subpar by historical standards, the data is not expected to have a major impact on the monetary policy outlook. Economists said it would take a payrolls number below 100,000 to jolt the Federal Reserve into action.
LITTLE ENTHUSIASM FOR MORE MONETARY EASING
However, it likely will not be strong enough to ease the pressure on President Barack Obama, who faces a tough re-election vote in November. The level of employment is still 5 million jobs below where it was in December 2007, when the economy fell into recession.
Analysts say the economy needs to create roughly 125,000 jobs a month just to keep the unemployment rate steady. While the jobless rate has dropped by 1 percentage point since August, that has largely been due to people leaving the labor force.
Economists expect the jobless rate to hold at a three-year low of 8.1 percent in May, although it could decline further if the exodus from the labor force continues. That exodus has reflected both baby boomers reaching retirement age and disenchanted unemployed people giving up the hunt for work.
The labor force participation rate - the share of working-age Americans who either have a job or are looking for one - dropped to a 30-year low in April.
The private sector is expected to account for all the job gains for a third straight month, adding 160,000 positions. Government payrolls are seen dropping by 10,000, dragged down by ongoing belt-tightening by local governments.
Construction employment is expected to rebound in May after declining in the prior three months, driven by an increase in residential construction.
Manufacturing, the recovery's star performer, is expected to show another month of gains.
In light of the high unemployment rate, average hourly earnings are seen rising a slight 0.2 percent.
"Given the current pace of growth, we are not going to see average hourly earnings increase in any significant way," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
(Editing by James Dalgleish)
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