Expectations Are Low for July Jobs Figures

Data made public over the past two weeks suggests the economy stalled in June and July.

Economists are expecting another disappointing month for the U.S. jobs market when official job-creation and unemployment figures for July are released on Friday.

Batches of economic data made public over the past two weeks mostly point to the economy having almost stalled out in June and July, and suggest businesses have been reticent to hire while the government was locked in a political battle over long-term economic policy and the debt ceiling.

But with expectations now very low, a bit of less-than-dire data released Wednesday could point to a surprise on the upside when the government's job figures come out -- though nothing that would change the official 9.2% unemployment rate.

Private payrolls firm ADP said its data showed that private companies created a net 114,000 jobs in June, double the government's first estimate released on July 8.

Ian Shepherdson, chief economist at High Frequency Economics, said the ADP number "certainly supports our contention that Friday will see either a decent increase, or a hefty upward revision to June, or both" for private-sector hiring.

HFE is forecasting a rise of 150,000 private jobs, offset by 30,000 public-sector employee layoffs, for a net July gain of 120,000 jobs.

But that is above the average analyst forecast of a net 84,000 jobs created in June, well below the estimated 100,000 needed just to accommodate new entrants to the workforce -- to meet the growing population.

Economists at Deutsche Bank are much more pessimistic, forecasting an increase of 75,000 private-sector jobs against 25,000 lost in the public sector -- for a net 50,000 gain.

Hiring overall has been weak for the past quarter, as economic growth dropped off to an annual rate of around 1%.

Consumer spending, a key driver of the economy, did not grow at all in the second quarter, and companies, though cash-rich, remained hesitant to grow their workforces.

Moreover, layoffs by budget-slashing federal, state and local governments have held down the net gains, to just 18,000 new positions in June, after just 25,000 in May, according to official government figures.

It amounts to a drop in the bucket, given that 14.1 million Americans were still jobless in June, two years after the 2008-2009 recession ended.

Data from the Institute for Supply Management early this week suggested the malaise continued through July. ISM's survey of the manufacturing sector pointed to no growth at all during the month, while its service-sector index was only marginally better, and showing growth at a crawl and slowing.

Thursday will deliver an advance hint of the state of the jobs market with the weekly numbers of new applications for unemployment insurance.

After hanging well above 400,000 a week since April, the figure fell to 398,000 in the week ending July 23 -- not a trend, but something for optimists to grab onto.

Copyright Agence France-Presse, 2011

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