Hiring likely improved in June as economy picks up

July 7, 2011 - 11:14 PM
Unemployment Benefits

A job seeker looks at a bulletin at the Texas Workforce Commission's Workforce Solutions of Greater Dallas job resource center in Richardson, Texas Tuesday, July 5, 2011. The number of people applying for unemployment benefits fell last week to the lowest level in seven weeks, although applications remain elevated. (AP Photo/LM Otero)

WASHINGTON (AP) — June may turn out to have been a good month to find a job after all.

Economists expect hiring to have improved significantly from May, when the economy added just 54,000 jobs.

The consensus forecast predicts only 90,000 jobs were added in June, according to a survey by FactSet. But a batch of strong economic data this week has inspired some last-minute upward revisions.

Many economists now estimate that employers added at least 120,000 jobs. And some are predicting as many as 200,000 net new jobs for June. The unemployment rate is expected to stay at 9.1 percent.

A strong report could signal that weak hiring in May was a setback caused by temporary factors and that the overall economy will rebound in the second half of the year.

"If it really is a good report ... it implies that we turned the corner late in the second quarter," said Kurt Karl, chief U.S. economist at Swiss Re.

The outlook brightened Thursday after payroll processor ADP said the private sector added 157,000 jobs last month. That was more than double the number economists had forecast. And it was much higher than the 36,000 jobs that ADP said employers had added in May.

Many economists said the ADP report was the reason they revised up their forecasts for the government's jobs report.

Nigel Gault, chief U.S. economist at IHS Global Insight, raised his projection for net job gains in June to 140,000 from 100,000. Ian Shepherdson, chief U.S. economist at High Frequency Economics, boosted his forecast to 175,000 from 100,000.

The ADP report, along with others Thursday, suggested that the overall economy may be starting to strengthen now that gas prices have begun to decline and supply disruptions stemming from Japan's crises have started to ease.

"We always took the view that May was hit by one-time factors like severe weather and supply-chain disruptions, but this report suggests those factors were more significant than we thought," Shepherdson said.

Employers pulled back in May after adding an average of 220,000 jobs per month from February through April.

The economy typically needs to add 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.

Among the evidence Thursday that the economy might be starting to pick up after a sluggish first half of the year:

— Retailers posted strong sales in June, boosted by widespread discounts. Target Corp., Costco Wholesale Corp. and Limited Brands Inc. all exceeded Wall Street estimates. The International Council of Shopping Centers said retailers collectively enjoyed their best June in 12 years, based on a tally of 28 store chains. The figures are based on revenue at stores open at least a year.

— The number of people who applied for unemployment benefits fell to a seasonally adjusted 418,000 last week, the Labor Department said. That's the lowest level in nearly two months. Still, applications have topped 400,000 for 13 weeks, evidence that the job market has weakened since the year began.

— Small businesses say they're more likely to boost hiring in the next three months, according to a survey by the National Federation of Independent Business. In May, more companies said they planned to cut jobs.

Gas prices have fallen sharply since peaking in early May at a national average of nearly $4 per gallon. Prices averaged $3.58 a gallon nationwide on Thursday, according to AAA.

And manufacturing activity expanded in June at a faster pace than the previous month, according to the Institute for Supply Management. That suggests the parts shortage caused by the March 11 earthquake in Japan is beginning to abate.

Still, the economy and job market are remarkably weak, two years after the recession officially ended and the recovery began. Unemployment has topped 8 percent for 28 months, the longest streak since the 1930s.

Unemployment has never been so high so long after a recession ended. At the same point after the previous three recessions, unemployment averaged just 6.8 percent.

The government said last month that the economy grew only 1.9 percent in the January-March quarter. Analysts are expecting similarly weak growth in April-June quarter.

The economy will grow at a 3.2 percent pace in final six months of the year, according to an Associated Press survey of 38 economists.

Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.