* Private payrolls rise 133,000 in May -ADP
* Jobless claims increase 10,000 last week
* Midwest business activity slows in May
* GDP revised down to 1.9 pct growth rate in Q1
By Lucia Mutikani
WASHINGTON, May 31 Private payroll growth picked
up only slightly in May and claims for jobless benefits rose
last week, suggesting the U.S. labor market recovery was losing
steam after a strong performance early in the year.
Other data on Thursday showed factory activity in the
Midwest slowed considerably in May and economic growth in the
first quarter was a bit softer than initially estimated.
Economists said the reports reflected business anxiety amid
an uncertain global economic outlook as the euro zone's debt
crisis escalates and China's economy slows.
"The economy is growing at an anemic pace and the job market
is showing some signs of hesitation in the pace of hiring. There
is a lot to worry about," said Paul Edelstein, an economist at
IHS Global Insight in Lexington, Massachusetts.
Private employers created 133,000 jobs in May, payrolls
processor ADP said. That was only a slight step up from April's
tepid increase of 113,000 and below economists' expectations for
a gain of 148,000.
The report comes ahead of the government's closely watched
employment report for May on Friday, which is expected to show
nonfarm payrolls increased 150,000, up from a paltry 115,000 in
The recent cooling in the labor market has been largely
viewed as payback for strong gains during the winter, when
unusually warm weather spurred economic activity. But economists
are starting to worry that the troubles in Europe and an
uncertain fiscal outlook at home are now dampening the U.S.
Initial claims for state jobless benefits rose 10,000 last
week to a seasonally adjusted 383,000, a Labor Department report
showed. Claims have now risen in seven of the last eight weeks.
Another report from consultants Challenger, Gray &
Christmas, Inc. showed the number of planned layoffs at U.S.
companies hit an eight-month high in May as computer maker
Hewlett-Packard said it would cut about 8 percent of its
Joel Prakken, chairman of forecasting firm Macroeconomic
Advisers, which helps produce the ADP report, said the soft
private-sector payroll gains of the past two months at least
partially reflected the unusual weather patterns, but he said
they also raised a red flag about fundamental weakness.
"Today's number both confirms and reinforces the
deceleration of employment that we saw last month," he said.
"While the deceleration is disappointing, it's hardly
surprising, given the tepid macroeconomic data we have seen
reported over the last several months."
The sluggish data and growing concerns over Europe's
increasing credit problems weighed on U.S. stocks. In Thursday's
session, all three major U.S. stock indexes ended the day with
modest declines. The Standard & Poor's 500 index ended
the month down 6.3 percent, its worst performance since
September. The Dow Jones industrial average lost 6.2
percent in May and the Nasdaq Composite Index slid 7.2
percent - marking their biggest monthly declines in two years.
Prices of U.S. Treasury debt jumped on flight-to-safety
bids, with the yield on the 10-year note dropping to
a record low of 1.53 percent. The dollar was little changed
against a basket of currencies.
A report from the Institute for Supply Management-Chicago
found factory activity in the Midwest lost steam this month. The
group said its business barometer fell to 52.7, the lowest since
September 2009, from 56.2 in April. A reading above 50 indicates
expansion in the regional economy.
Other regional surveys of factory activity also have found
activity slowing, suggesting the manufacturing sector was losing
a step nationally. The Institute for Supply Management will
release a report on national factory activity for May on Friday.
Cary Leahey, a senior economist at Decision Economics in New
York, said that based on historical relationships, the Midwest
factory index suggested the national ISM reading could dip below
the 50 mark within the next couple of months.
Separately, the Commerce Department said U.S. gross domestic
product increased at a 1.9 percent annual rate in the first
quarter, down from the 2.2 percent it had estimated last month.
The economy grew at a 3.0 percent rate in the fourth
Businesses restocked shelves more slowly than previously
thought and government spending declined more sharply. There was
also a modest downward revision to consumer spending, which
accounts for about 70 percent of U.S. economic activity, and
stronger import growth.
Business inventories added only 0.21 percentage point to GDP
growth compared with a previously estimated 0.59 percentage
While the small inventory build-up held back growth in the
January-March quarter, restocking of shelves, retreating
gasoline prices and an improving housing market should provide a
boost to output in the second quarter. Growth in the second
quarter is currently estimated at a pace of about 2.5 percent.
U.S. retailers on Thursday reported stronger-than-expected
sales for May as bargains helped shoppers overcome anxiety about
the economy and job market, an encouraging sign for
second-quarter GDP growth.
The GDP report also showed that after-tax corporate profits
dropped for the first time in three years last quarter. The
decline reflected the end of a special tax bonus that allowed
U.S. companies to accelerate the depreciation of assets.