Latest data further muddy economic outlook

Applications for unemployment benefits decreased last week, even as growth in the nation’s service industries slowed in June to the lowest level in well over two years, adding contradictory data to an already muddy economic picture leading into Friday’s jobs report.

First-time claims for jobless benefits declined by 14,000, to a seasonally adjusted 374,000, in the week that ended June 30, dropping to the lowest level since mid-May, the government reported Thursday. At the same time, a private survey found that service industries in the United States grew at the slowest rate since January 2010.

The Institute for Supply Management’s index of non-manufacturing activity declined to 52.1, from 53.7 in May, reflecting the economy’s struggle to gain momentum after a surprising burst of growth early this year. A score of more than 50 indicates expansion; less than 50, contraction.

The mixed signals added another dollop of confusion to an economy that has been whipsawed by false starts and crippled by fiscal turmoil in Europe and political paralysis in Washington in the aftermath of the recession.

After a strong winter, job growth has slowed to a crawl, with the nation’s payrolls growing by only 69,000 jobs in May, marking the second consecutive month of tepid employment growth.

The nation’s jobless rate for May was 8.2 percent, and analysts were divided about what to expect when the Labor Department’s Bureau of Labor Statistics releases its June jobs report Friday.

ADP Employer Services said Thursday that companies added 176,000 jobs in June, which would indicate a healthy rebound in job creation. The ADP report, based on data from businesses with a total of more than 21 million workers, was more upbeat than the median forecast of economists surveyed by Bloomberg News, which has the nation’s payrolls growing by 100,000 jobs in June.

“Today’s estimate, if reinforced by a comparable reading on employment from the Bureau of Labor Statistics, likely will ease concerns that the economy is heading into a downturn,” said Joel Prakken, chairman of Macroeconomic Advisers, which collaborates with Automatic Data Processing on the ADP report. “There seems to be little doubt that recent economic gains have been restrained by heightened uncertainty over the European financial crisis and by growing concern about domestic fiscal policy.”

Other analysts were more circumspect.

Chris Lawson, chief executive of the Eli Daniel Group, a Dallas-based staffing firm, said the jobs picture remains muddled. “We’re getting into this wait-and-see trap,” he said.

Lawson said that some employers are worried about what is going to happen in the presidential election, which will determine how the health-care law plays out.

“Small businesses are thinking about the new health-care landscape,” Lawson said. “They ask themselves, ‘Am I going to add staff or wait and see what shakes out with this election?’ On the data, there seems to be more negative news than positive. My guess is we’ll see unemployment remaining the same, or that number could go up a bit. I don’t see us all of a sudden starting to turn the corner.”

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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