Economic Outlook Gets Gloomier After Jobs Report

economic outlook jobs report MayBy Christopher S. Rugaber

WASHINGTON (AP) -- The faltering U.S. job market has prompted economists to take a much dimmer view of the country's growth prospects. That's a shift from just a few weeks ago, when many were upgrading their forecasts.

Friday's surprisingly bleak jobs report for May followed a spate of disappointing data. Manufacturing activity slowed, an index of home sales fell and consumer confidence tumbled. Mounting troubles in Europe and elsewhere have heightened economists' concerns. "The latest economic data have been decisively disappointing," Michael Feroli, an economist at JPMorgan Chase, wrote in a client note.

JPMorgan Chase sharply reduced its growth forecast for the July-September quarter to a 2 percent annual rate, down from 3 percent. It cited the weaker U.S. hiring and a likely drop in U.S. exports related to slower growth overseas.

And JPMorgan Chase now forecasts growth of 2.1 percent for 2012, down from 2.3 percent.

Julia Coronado, an economist at BNP Paribas in New York, said she now expects growth of 2.2 percent this year, down from her previous forecast of 2.4 percent. She also revised down her estimate of growth in the April-June quarter to a 2.2 percent annual rate, from a 2.5 percent rate.

"We keep hoping that we're going to turn a corner and move into a stronger phase of recovery, and the door keeps getting slammed shut," Coronado said.

Forecasting firm Macroeconomic Advisers and Swiss bank UBS have also marked down their expectations since Friday's jobs report.


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As a general rule, it takes about 2.5 percent growth to generate enough hiring to keep up with population growth and prevent the unemployment rate from rising. The reduced forecasts suggest that hiring may not strengthen much this year.

After months of fitful expansion since the recession ended three years ago, many analysts had expected the economy to begin strengthening steadily.

Last month, the National Association for Business Economics said its latest survey of economists found rising expectations for job gains and housing construction. And in April, the Federal Reserve raised its forecast for growth this year to nearly 2.7 percent, from a January estimate of 2.5 percent.

Now, it looks as if the recovery is stumbling again.

The biggest blow was Friday's jobs report. It said employers added only 69,000 jobs in May, the fewest in a year. The government also said far fewer jobs were added in the previous two months than first thought - 11,000 fewer in March and 38,000 fewer in April. And the unemployment rate rose to 8.2 percent from 8.1 percent, the first increase since last June.

Less hiring means fewer Americans have money to spend. That holds down consumer spending, which drives about 70 percent of the economy and helps fuel job growth. And a rising unemployment rate tends to reduce confidence. That can further shrink spending.

Even at stronger levels of hiring, Americans' incomes had been already growing only weakly. They increased 0.2 percent in April, the government said last week, the slowest pace in five months.

Other reports last week showed that more people sought unemployment benefits, a sign that hiring could remain sluggish. Construction spending rose, but by less than many economists had forecast. And the government said the economy expanded at an anemic 1.9 percent annual rate in the first three months of 2012. That's down from 3 percent in the fourth quarter.

The run of bleak reports extended into Monday. Companies cut their orders to factories for a second straight month, the government said. And a gauge of business investment plans fell.

On top of that, Europe's financial crisis is worsening. Worries are growing that in elections later this month, Greek voters will reject the terms of a bailout and lead the country to drop the euro. That could ignite financial chaos and perhaps force larger economies among the 17 countries that use the euro, such as Spain and Italy, to abandon the currency, too.

The resulting crisis would slow U.S. exports, about 20 percent of which go to Europe. Fear about a collapse of the euro has contributed to a nearly 10 percent drop in the S&P 500 stock index since April 2. Falling stock prices tend to damage consumer confidence and reduce spending.

Key developing countries, such as China, India and Brazil, are also reporting weaker growth. Those countries are big markets for U.S. heavy machinery. U.S. farmers also export corn, soybeans and other grains to China.

"You've got deterioration on all fronts at this point," said Scott Anderson, an economist at Wells Fargo Securities.

Anderson said Wells Fargo will likely reduce its forecasts for U.S. growth.


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Still, some trends remain positive for the U.S. economy. Gas prices have been falling, which puts more money in Americans' pockets. With mortgage rates at record lows, more Americans are buying homes. Builders have increased spending on construction. Auto sales are up.

Maury Harris, chief U.S. economist at UBS, said the weak May jobs report shows businesses are nervous about the economic outlook. Yet consumers remain willing to spend. Their spending rose 0.3 percent in April, above the 0.2 percent rise in March. That qualifies as a bright spot in last week's reports. Harris expects consumer spending to keep rising and to reinvigorate business activity by fall.

Jack Kleinhenz, chief economist at the National Retail Federation, the nation's largest retail trade group, says he's sticking with the group's annual retail sales growth forecast of 3.4 percent for now.

"I'm concerned, but I am not ready to put up a red flag on everything," Kleinhenz said.


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billradz

It's a known fact that the U.S. Secretary of Commerce believes in globalization, outsourcing and strong overseas business relationships. This perspective falls in line with those U.S. companies manufacturing in the Far East. Those companies, many of whom are listed on the NYSE, justify their offshore manufacturing by saying they want to remain competitive. Staying competitive increases sales of their product, increases the price per share of their stock, attracts new shareholders, investments and keeps their current shareholders a very happy group. This all stems from "greed" and they would rather send their manufacturing offshore than keep their current U.S. workforce making the products here. It's really a very sad scenario and unless manufacturing changes their direction, nothing will change.

June 05 2012 at 8:38 PM Report abuse rate up rate down Reply
Rick Nelson

WE SHOULDN'T GIVE OBAMANOTHER DAY LET ALONE 4 MORE YRS. JIMMY CARTER MUST LOVE THIS HE IS NO LONGER THE WORST PREZ OF THE USA.

June 05 2012 at 8:34 PM Report abuse rate up rate down Reply
michael murphy

obama will lose in novemeber by a landslide

June 05 2012 at 8:29 PM Report abuse rate up rate down Reply
button2cute

Sitting around and bytching, does not seem to be building jobs at this moment. I bet it feels great...though to blow off steam.

Outsourcing, catabolic reaction of farmland to urbanization, stop working and demand for money (greed between labors and employers), blaming others, no one want to be held accountable for the unemployment forecast, etc.

No one wants to build or try to fight back for his or her country or oneself. Unless one receives, the greed pay and one will fight like crazy. Greed places us in a different attitude, behavior, environment and feelings. All of us, we need to live in our means and help others and be thankful for the simple things in life.

For instant, you may think this is dumb...give me a few minutes:
If everyone or majority of everyone participates in the following a tremendous change can occur.

A. Do not purchase gas only on certain days such as: 1) West and East Coast on Monday and Wednesday & Friday 2) North and south on Tuesday and Thursday & Saturday 3) Sunday as needed...do not abuse...do not fill unless you absolutely need too. Leave one day no gas purchases.

B.. Do not purchase foreign products.

D. Create jobs without using loans from the bank. Try borrowing money and giving a percentage of the business until the loan is pay to a friend or someone you know from your family. Lastly, downsize the business to affordability and then grow.

E. We can start from the ground up with little stores and business. Not get too big for our britches.

June 05 2012 at 7:19 PM Report abuse rate up rate down Reply
swabbymcnasty

LMFAOOOOOOOOOOOO,, And THIS is some kind of SURPRISE?? GOOD GAWD,, The last 3 1/2 YEARS have been the Same song and dance. And THIS CHUMP wants 4 MORE YEARS??? I cant even LAUGH its so stupid

June 05 2012 at 7:14 PM Report abuse rate up rate down Reply
jallen32

give obamma 4 more years! mayabe just maybe he can turn it around?

June 05 2012 at 5:43 PM Report abuse rate up rate down Reply
DRILLER

Imagine That.
another downVote forthe most worthless president since jimmy Carter

June 05 2012 at 5:34 PM Report abuse +2 rate up rate down Reply
1 reply to DRILLER's comment
Iselin007

Drill a little deeper it's been crummy for 3 decades at least if not more.

June 05 2012 at 5:39 PM Report abuse -1 rate up rate down Reply
Iselin007

How many lives have you destroyed with outsourcing? How many older people have been crippled up trying to do heavy manual labor because their trades were exported. How's that Health insurance premium now that all the group plans lost their members as the good jobs were outsourced? Your going to import your way to prosperity?Your real export is jobs who are you kidding?

June 05 2012 at 5:33 PM Report abuse rate up rate down Reply
Iselin007

When a factory closes you lose suppliers, the freight and rail companies collapse the transportation roads and rails crumble the steel companies etc all suffer. Geat now we have over priced mansions where the tracks once were. The farms destroyed for complexs of condos. What do you do now tear down all of the realstate loan scams down to put back what we once had?

June 05 2012 at 5:15 PM Report abuse rate up rate down Reply
Iselin007

Did you think you could outsource jobs an expect to keep an economy? Who dreamed this up your enemies?

Our cities are decaying along with much of our infrastructure like our roads and bridges. Much of our rail lines were eliminated for a greedy housing boom as the factories closed. How you paying for all this with part time low wage jobs? Our skills are fading yet the enemies are sharpening their own with what was once ours.

June 05 2012 at 4:51 PM Report abuse rate up rate down Reply

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