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U.S. job growth remains weak, May data show

A key survey of businesses released Thursday revealed a pickup in the pace of job creation in May, but the growth was not enough to shake lingering fears about the impact of a broader global slowdown.

The ADP National Employment Report showed a gain of 133,000 jobs last month — less than economists had expected. Most of the increase was driven by the service industry, while manufacturing and construction employment declined.

The ADP survey is widely viewed as a bellwether of the government’s official employment data, which is set to be released Friday. Economists have predicted that the country added 150,000 jobs in May on hopes that the slowdown in hiring over the past several months was merely a fluke of unseasonably warm weather. But the weaker-than-expected ADP results could indicate more fundamental challenges to the recovery. The May unemployment rate is expected to remain 8.1 percent.

“The sharpness of the deceleration seems consistent with other incoming data suggesting the economy, weighed down by heightened uncertainty over the European financial crisis and by growing concerns about domestic fiscal policy, slowed early in the year,” said Joel Prakken, chairman of Macroeconomic Advisers, which helped compile the report.

The Labor Department’s weekly tally of people filing for unemployment benefits for the first time also dampened optimism. The number rose by 10,000 last week, to 383,000, while the previous week’s results were revised slightly upward.

Adding to the dour economic news were Commerce Department data showing that economic growth was slower than initially estimated. The agency revised first-quarter GDP growth down to a 1.9 percent annual rate, compared with the previously announced 2.2 percent rate.

“The domestic economy has repeatedly looked as if it was finally gaining traction, only to be beaten back again by the unique problems that keep surfacing during the recovery process,” said Steven Ricchiuto, chief economist at Mizuho Securities.

Not all of the economic news has been dour. Robert Dye, chief economist at Comerica Bank, said he is encouraged by recent data indicating that Main Street is strengthening despite volatility on Wall Street: Gas prices have moderated, the decline in housing prices has slowed, and auto sales to be released Friday are expected to be strong.

Several of the nation’s largest retailers on Thursday reported solid sales for May. Cheap-chic chain Target reported that sales at existing stores jumped 4.4 percent in May from a year ago, at the high end of its expectations. At Macy’s, same-store sales rose 4.2 percent from May 2011. Same-store sales jumped 8 percent from the same time a year ago for discounter TJX, which owns T.J. Maxx and Marshalls and raised its second-quarter earnings estimate.

“The economy is feeling better, but the concern is that endogenous growth in the U.S. has to be strong enough to overcome the exogenous headwinds,” Dye said.

Though consumer confidence has dipped, the U.S. economy remains a bright spot compared with struggling countries such as Spain and Greece. The euro zone has fallen back into recession. Meanwhile, growth in once-booming emerging markets such as China and India has slowed down.

Economists also warned that rising tensions in the Middle East, particularly over Iran’s nuclear program, could push oil prices back up. That would dial back the gains in consumer spending as shoppers enjoyed some relief at the pump.

The uncertainty over the global economy has constrained domestic growth, said Bernard Baumohl, chief global economist for the Economic Outlook Group.

“These are periods that are very difficult to predict,” he said. “There is such a lack of clarity where the economy is heading that companies are apprehensive about significantly ramping up hiring.”

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.



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