WASHINGTON – A postwar jump in consumer confidence and higher stock prices have raised hopes for a U.S. economic rebound, but the job market is still expected to remain listless for months to come.
On Friday, the Labor Department will offer its latest snapshot on employment, for May, and analysts project it will show that businesses are still determined to keep payrolls lean.
"This data may be a problem in that it could show extreme labor market weakness, but it will be a lagging indicator of what's going on in the rest of the economy," said Chris Rupkey, economist with Bank of Tokyo-Mitsubishi Ltd. in New York.
"All of the anecdotal data suggests things are going to be improving," Rupkey added.
U.S. economists in a Reuters poll projected a 39,000 drop in payrolls in May. The jobless rate is forecast to creep higher to 6.1 percent from 6 percent in April.
Factory owner Don Wainwright, head of Wainwright Industries in St. Louis, is among the businesspeople who believe the economic outlook may be on the verge of brightening.
"I think we've actually turned the corner," he said.
Still, Wainwright said it will be a while before he begins to even think about adding staff members to his firm, which makes components for the aerospace and automotive industries.
"There isn't any pricing power," he said, adding that has forced his company to work hard to hold down costs.
If the May employment data, which are due out at 0830 EDT on Friday, confirmed a landscape of weakness exemplified by employers like Wainwright, it could bolster the case for a cut in interest rates by the Federal Reserve.
Fed Chairman Alan Greenspan on Tuesday hinted at an interest-rate cut when he said in a panel discussion that it might be wise to lower borrowing costs as an "insurance" against economic weakness.
Policy-makers next meet June 24-25, with many in financial markets debating not whether they will cut interest rates but by how much -- a quarter of a percentage point or a half.
Highlighting the mixed signals in the data lately, the Fed chief said on Tuesday that with only a short time elapsed since the war with Iraq ended, it is "too early to get any real fix on the American economy in the period ahead."
Economists have been focusing heavily on jobless claims figures as a guide to what the payrolls report may show.
While first-time claims for benefits have fallen a bit in recent weeks, as of the week ending May 24, they were at 424,000 -- still stubbornly above the 400,000 level analysts associate with poor labor-market conditions.
There are some encouraging signs out there, however.
According to job placement firm Challenger, Gray & Christmas, the number of job cuts announced at U.S. employers fell sharply in May to the lowest level in 30 months.
Although Friday's jobs report is widely expected to show labor market softness, several analysts cautioned the data may be hard to interpret.
That's because the Labor Department is planning a major overhaul of the payrolls figures with the May report, as it puts in place a more modern method for classifying industries and phases in new procedures for picking the companies in its survey.
Analysts will find it harder to judge how the employment picture changed in May from April, when the jobless rate rose to 6.0 percent as payrolls slid by 48,000.