Quantcast
Last updated on April 20, 2014 at 17:20 EDT

U.S. job growth seen picking up in June

July 6, 2005

By Andrea Hopkins

WASHINGTON (Reuters) – U.S. job growth last month likely
shook off May’s doldrums, but economists said the unemployment
rate probably didn’t budge as spring graduates and other
workers entering the labor force offset stronger hiring.

Analysts believe the economy created 188,500 jobs in June,
more than double the disappointing 78,000 gain in May,
according to the median forecast from a Reuters survey.

But predictions ranged widely, from an increase of 95,000
jobs to as many as 275,000, and experts warned June can be a
volatile month because education-related jobs tend to decline
while the hiring of college graduates surges.

The unemployment rate is expected to be unchanged at 5.1
percent, since the hiring growth will likely be counterbalanced
by new job seekers.

The closely watched employment report is set for release by
the Department of Labor at 8:30 a.m. (1230 GMT) on Friday.

For many analysts, the biggest reason to expect a
relatively large employment gain in June is simple: May’s
growth was small, and recent history shows a disappointment one
month will be followed by stronger growth the next.

“Our forecast is not based on any signs of an underlying
improvement in the labor market. Instead, it is simply that
last month’s increase turned out to be well below the level
consistent, on balance, with other indicators,” said Paul
Ashworth, senior international economist at Capital Economics,
predicting a 130,000 gain.

Bill Dudley, chief U.S. economist at Goldman Sachs, took a
similar approach.

“Since June 2004, payroll gains have moved alternatively up
and down each month. To keep that pattern intact, payrolls must
move up in June,” Dudley said in a research note.

Since the start of the year, the see-saw pattern of job
growth has been particularly acute: 124,000 in January, 300,000
in February, 122,000 in March, 274,000 in April, and 78,000 in
May.

VOLATILE MONTH

While the monthly employment report is adjusted to take
into account things like weather and the school year, Dudley
cautioned such seasonal factors may have been distorted by
several consecutive years of below-average summer hiring.

The myriad of economic reports that shed light on the
strength of U.S. hiring have also offered mixed messages.

The jobs measure of the Institute for Supply Management’s
services index surged to 57.4 from 53.4 in May, suggesting
strong employment growth in the sector, which accounts for
about 80 percent of the economy.

“It seems that the non-manufacturing sector improved in
early summer after softness in the spring. Employment improved,
which is consistent with our view that we will see a rebound in
payrolls growth in June,” said Elisabeth Denison, economist at
Dresdner Kleinwort Wasserstein in New York.

But employment consulting firm Challenger, Gray & Christmas
said on Wednesday U.S. firms planned 110,996 job cuts last
month, the highest since January 2004.

Separately, a Department of Labor report last week
suggested fairly robust job growth, showing new claims for
unemployment benefits fell to 310,000 in late June, its lowest
level in more than two months.

“On balance, the labor market still appears to be ticking
over … with the six-month average payrolls gain running at
175,000 a month. That is more than enough to match the growth
in the labor force, but not much more,” said Ashworth. “We
don’t anticipate any marked departure from that trend over the
summer months.”

Economists and Federal Reserve officials will also watch
Friday’s report for signs job growth is pushing wages higher –
which could spark inflation worries.

The Reuters survey forecast a 0.2 percent increase in
average hourly earnings, matching May’s rise. The length of the
workweek was expected to be unchanged at 33.8 hours.