Reports signal labor market is still listless

All eyes turn to today’s employment report

Reports on private-sector job growth, jobless claims and layoffs Thursday depicted a still-tepid labor market and raised concerns that the government’s employment survey today could show a third month of sluggish payroll gains.

Also, the Commerce Department on Thursday revised its estimate of firstquarter economic growth to 1.9% from 2.2%, as investment by budget-strapped state and local governments fell more sharply than believed, and consumer spending was slightly less robust.

Payroll processor ADP said private employers added 133,000 jobs in May, with large businesses and manufacturers posting weak job growth for a second month. A consensus forecast of economists predicted employment gains of 150,000. Private-sector job growth in April was revised to 113,000 from 119,000.

Small businesses, with fewer than 50 workers, added 67,000 jobs, and midsize firms — with 50 to 499 employees — added 57,000. But employment at large companies, with 500 or more workers, increased by just 9,000.

The ADP survey often differs substantially from the Labor Department’s official report, though it generally reflects broad trends in the job market, and it accurately foreshadowed April’s weak tally by Labor.

Economists’ consensus forecast estimates that Labor will report today that non-farm employers, including private and government, added 150,000 jobs in May, up from an average 134,000 the previous two months but below the monthly pace of 252,000 additions from December through February.

Some economists have attributed the slowdown to a temporary snap-back effect after warm winter weather pulled forward construction and manufacturing activity to January and February.

Diane Swonk, chief economist of Mesirow Financial, agrees that the unusual weather had some residual impact in May. But she says much of the weakness is likely due to slower economic growth in Europe and China that’s dampening U.S. exports and creating uncertainty among U.S. corporations. Commerce’s downward revision to first-quarter economic growth undermines the idea that most state and local government cuts are done, Swonk says. The slowdown is “more than just give-back from unusual weather trends,” she says.

Swonk says the ADP survey prompted her to revise her estimate of job gains in Labor’s survey to 125,000 from 150,000. She says she expects the economy to continue to grow but at a modest pace this year.

RDQ Economics says job growth this year is still noticeably stronger than in the second half of 2011. It expects Labor to report private-sector gains of 175,000.

Separately, the number of Americans applying for unemployment insurance for the first time unexpectedly rose by 10,000 last week, to 383,000, Labor said. The four-week moving average increased by 3,750 to 370,750, the highest since January.

Employers last month announced plans to lay off nearly 62,000 workers, up from 40,500 in April and the most since September, says outplacement firm Challenger Gray & Christmas. However, 27,000 of those cuts were announced by one company, HewlettPackard.