Private Job Growth Weaker; Factories Losing Steam

The job market's already slow recovery looks to be losing momentum, and so is the manufacturing industry.

Private employers added just 38,000 jobs in May, down from 177,000 in April, according to payroll processor ADP. It's the weakest result since September. The report may offer a preview of Friday's more comprehensive job report from the Labor Department, which includes hiring by both private employers and the government.

"As far as we can tell, employers have hugely over-reacted to the surge in oil prices, which has slowed but not killed consumption," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. The weak ADP results pushed him to cut his forecast for overall job growth in May to 75,000. He earlier had forecast Fridays' report to show growth of 175,000 jobs.

The ADP report has been wrong before as an indicator for the Labor Department's job report. Last month, it underestimated growth. The private sector added 268,000 jobs in April, according to the government.

Even the manufacturing industry, one of the U.S. economy's bright spots since the recession ended, is losing momentum.

A report from the Institute for Supply Management showed manufacturing expanded in May for the 22nd straight month, but at its slowest pace since September 2009. The ISM's manufacturing index fell to 53.5 in May from 60.4 in April. A reading of more than 50 indicates the manufacturing industry is growing.

As far as we can tell, employers have hugely over-reacted to the surge in oil prices, which has slowed but not killed consumption.

- Ian Shepherdson, chief U.S. economist for High Frequency Economics

Manufacturers have benefited since the recession's end from stronger overseas demand, but China, India and other developing nations are struggling with inflation.

Construction spending rose 0.4 percent in April, according to a Commerce Department report Thursday. But it is still close to its lowest level in more than a decade.

The jump in spending on home improvements offset declines in single-family homes and apartment construction. And the slight gain followed a sharp downward revision to the March figures. The government said spending rose only 0.1 percent for the month, down from its initial estimate of 1.4 percent growth.

Source: http://www.npr.org/2011/06/01/136855928/private-job-growth-weaker-factories-losing-steam?ft=1&f=1001

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