Job hopes rise on flurry of reports

By MARTIN CRUTSINGER

AP Economics Writer

WASHINGTON - Fewer people are filing claims for unemployment aid, new jobs are showing up in service industries, and companies are squeezing all they can from lean staffs and may need to hire soon.

Hopes for the job market brightened Thursday ahead of a closely watched report on the nation's employment picture - although experts cautioned that the economy probably isn't creating jobs as quickly as usual after a recession.

"While we will see a period of job growth, it is going to take a long time to get back the jobs we lost," said Mark Zandi, chief economist at Moody's Analytics, who predicts the nation will not recover the 8 million jobs lost in the downturn until 2013. Zandi says it will take until 2015 to get back to full employment, which he defined as a jobless rate of around 5.5 percent.

Economists predict the May jobs report, due out this morning, will show the nation added 513,000 jobs in May. But most of them, as many as 400,000 by some estimates, will be temporary government jobs to help with the census.

The unemployment rate is expected to fall slightly, to 9.8 percent from 9.9 percent.

While analysts say layoffs will keep tapering off and companies will gradually hire more, a lack of strength throughout the economy complicates the recovery.

Americans' appetite for spending has eased. Manufacturing output has been strong, but that's mostly because businesses are replenishing their stockpiles after slashing them during the recession.

Unless Americans pick up the pace on spending, manufacturing could fizzle. And consumer habits are closely tied to employment and wage growth.

"We have a very mixed picture at the moment," said Nigel Gault, chief U.S. economist for IHS Global Insight.

Gault said the economy is probably growing slightly faster now than in the first quarter of the year, but the boost is coming from temporary factors, like the homebuyer tax credit that expired at the end of April.

"This is a very soft recovery compared to what you would normally see after such a deep recession," Gault said. "The financial crisis did bad things to balance sheets, and people are still working off the problems of that excess debt."

Hiring may pick up if businesses find they can't wring more work out of thinner ranks. Productivity grew in the first quarter at the slowest annual pace in a year - 2.8 percent, the Labor Department said Thursday.

A separate report Thursday showed first-time claims for unemployment aid fell for a second straight week. Still, the decline came after a sharp increase three weeks ago.

And claims, considered a measure of how willing companies are to hire, remain at elevated levels.

The service sector, a broad category ranging from construction to retail to health care, accounts for about four of every five U.S. jobs outside of farms. It expanded in May for the fifth month in a row. And the Institute for Supply Management, a trade group of purchasing executives that monitors the industry, said its jobs measure rose for the first time in more than two years.

Employers "are now starting to feel a bit more confidence as far as bringing back some jobs," said Anthony Nieves, a Hilton Worldwide executive who serves as chairman of ISM's non-manufacturing business survey committee.

Economists still worry that the service sector, like most sectors outside of manufacturing, isn't expanding fast enough. Adding to the picture of a slow recovery were reports Thursday showing modest increases in factory orders and retail sales.

More orders came in to U.S. factories in April, particularly for commercial aircraft, the government said. But the increase was smaller than in March, and orders outside of transportation actually fell, the worst showing in about a year.

Americans spent with caution in May after a tepid April, according to the International Council of Shopping Center index released Thursday. Cool weather dampened May spending. So did a late Memorial Day weekend that pushed some recorded sales into June.

But analysts also cited high unemployment, stock market jitters and the dwindling of government-funded rebates on energy-efficient appliances.uted to this report from Washington and Anne D'Innocenzio from New York.