* May payrolls seen up 150,000; private jobs up 175,000
* Jobless rate seen edging down to 8.9 pct from 9 pct
* Average work week seen steady, earnings to rise modestly
By Lucia Mutikani
WASHINGTON, June 3 U.S. employment probably
lost steam in May as high energy prices and the effects of
Japan's earthquake bogged down the economy.
Nonfarm payrolls likely increased 150,000 last month,
according to a Reuters survey of economists, after advancing by
an 11-month-high of 244,000 jobs in April.
The job creation slowdown would confirm the economic
weakness already flagged by other data from consumer spending
to manufacturing. It could stoke fears about the depth and
duration of a slowdown that started early in the year.
Economists still believe the lull in activity will be
temporary. They cite high gasoline prices, bad weather and
disruptions to motor vehicle production because of a shortage
of parts from Japan as factors weighing on growth.
"It is clear we have temporarily entered a soft patch,"
said Christopher Probyn, chief economist at State Street Global
Advisors in Boston.
"Nobody knows how soft and how long, but the best case view
is that the fundamentals of the recovery remain intact and the
economy will re-accelerate in the second half of the year."
The Labor Department will release its closely watched
employment report at 8:30 a.m. (1230 GMT). The report provides
one of the best early reads on the health of the U.S. economy
and it regularly sets the tone for global financial markets.
Worries about the pace of the U.S. economic recovery
weighed on stocks on Thursday. Investors took a defensive
stance given the risks May job growth numbers could prove even
worse than the market expects.
While the recent string of weak data has sparked talk about
the need for the Federal Reserve to extend its asset purchasing
program when it expires this month, analysts believe
policymakers will take a soft payrolls report in stride.
Officials at the U.S. central bank regard the current
downshift in the economy as temporary.
The Fed has been mapping out a strategy on how to start
removing some of the massive stimulus it has lent the economy,
and officials have made clear the bar for a further easing in
monetary policy is high.
Private employers, who have shouldered the burden of job
creation, are expected to have taken a step back last month,
increasing payrolls by 175,000. In April, they added 268,000
jobs, the most in five years.
TEMPORARY FACTORS AT PLAY
"We should keep in mind that we have seen a lot of factors
weighing on the U.S. economy in April and May, and should take
this report with a pinch of salt," said Harm Bandolz, chief
U.S. economist at UniCredit Research in New York.
"We may see some positive surprises in the second half of
the year once the impact fades."
High gasoline prices hurt consumer spending in the first
quarter, restricting economic growth to a 1.8 percent annual
pace after expanding at a 3.1 percent rate in the
The economy has regained only a fraction of the more than 8
million jobs lost during the recession. Economists say payrolls
growth above 300,000 a month is needed to make significant
progress in shrinking the pool of 13.7 million unemployed
Americans and reducing 9 percent unemployment.
The jobless rate is thought to have edged down to 8.9
percent last month, but it could surprise on the upside if some
discouraged workers who had been inspired by the pick up in
hiring in April decided to re-enter the labor market.
"There is so much slack in the labor market it's going to
take a long time to get the unemployment rate down to between 6
and 7 percent. That's going to take years," said Stephen
Bronars, a senior economist at Welch Consulting in Washington.
That could be bad news for President Barack Obama, whose
chances of re-election next year could hinge on the health of
the economy, particularly the labor market.
The report is expected to show the private services sector
accounted for the bulk of job gains last month.
Within the private services sector, gains were expected in
leisure and hospitality, which added 46,000 jobs in April. But
retail employment, which recorded its largest increase in 10
years in April, likely slipped.
Little or no boost was expected from McDonald's recruitment
of about 50,000 new staff in April, which was after the survey
period for that month's payrolls. Spring is traditionally a
strong hiring period for McDonald's.
Manufacturing payroll growth was expected to have moderated
last month after the sector added 29,000 new workers in April.
Construction employment was also likely weak. Housing
starts fell sharply in April.
The report is expected to show the average work week
unchanged at 34.3 hours and few signs of wage inflation, with
average hourly earnings rising 0.2 percent after edging up 0.1
percent in April.