As the signs of a weakening economy mounted this spring, there was a common argument from analysts: The causes of the slump were temporary, and growth is poised to strengthen after those factors — such as higher fuel prices and the Japanese earthquake — dissipate.
A report on the job market due out Friday morning will be the clearest evidence yet whether that theory is correct.
The last report showed exceptionally weak job creation in May: Only 54,000 jobs were added that month, the Labor Department said — a rate that, if sustained, would cause the unemployment rate to rise rather than fall. Indeed, in May the jobless rate ticked up to 9.1 percent, the second straight month of increase.
The question now is how weak the underlying pace of job growth really is. Was the lousy May number a true indication of the state of the job market? Or was it an aberration, with the solid job growth of about 200,000 jobs in each of the previous three months more reflective of the true trend?
Economists expect the answer will be somewhere in between. The consensus of forecasters is that employers added 105,000 jobs in June, and that the unemployment rate will be unchanged. Even if that projection is correct, it would be a disappointing result. Employers need to add about 125,000 jobs a month to keep up with an ever-growing population.
Forecasters expect private job creation to be somewhat stronger, with a gain of 132,000 positions projected, with job cuts by state and local governments dragging down overall job-creation numbers.
There were two signs of mild improvement in the jobs picture Thursday. The Labor Department said that 418,000 people filed new claims for unemployment insurance benefits last week, down from 432,000 the previous week. And ADP, the payroll processing firm, estimated that private employers added 157,000 jobs in June, compared with 70,000 in May.
“Payroll employment growth at this pace usually implies a steady unemployment rate, perhaps even a modest decline,” said Joel Prakken, chairman of consulting firm Macroeconomic Advisers, which helps prepare the ADP numbers. “June’s figures suggest that the economic recovery, which slipped in the spring, might have found new traction in early summer.”
The economy expanded at a weak pace over the first half of the year, something on the order of 2 percent. Economists have attributed that in part to a series of negative surprises — the spiking of oil and other commodity prices in the wake of political turmoil in the Middle East, a winter filled with disruptive snowstorms and the Japanese earthquake in March that has had lingering effects on the supply lines for U.S.-made automobiles.
The question now is how much of that weak growth — and commensurately soft job creation — was indeed a story of some bad luck rather than a faltering of the expansion. Besides those temporary factors, the housing sector performed even weaker than had been expected, and the economic drag from consumers paying down their debts seems to have been greater than most forecasters expected.
For those reasons, the Federal Reserve last month downgraded its forecast not just for 2011 growth, but for 2012 growth, which, as Chairman Ben S. Bernanke said at a news conference, reflected a sense that the temporary factors are only part of the story behind the weak economy in 2011 so far.
“A stronger report will add to the sense that the recent weakness is likely to prove transitory and we are heading into a stronger patch that will provide a better set of trade-offs for policymakers,” said Julia Coronado, chief North American economist at BNP Paribas, in a research note. “On the other hand, a weaker tone will keep alive questions about the fragility of the U.S. recovery and make policy choices increasingly difficult.”