WASHINGTON – The economy is tiring again.
Reports Wednesday on manufacturing and company hiring were so weak that many economists immediately downgraded their forecasts for Friday’s jobs report covering May. Some analysts also slashed their estimates for growth in the April-June quarter.
“We’re definitely in a soft patch,” said Steve Blitz, senior economist for ITG Investment Research.
No one knows whether the slowdown is a temporary setback or the start of a prolonged period of anemic growth. Many analysts hold out hope that the economy will rebound in the second half of 2011.
They say some of the problems restraining growth now — high oil prices, U.S. natural disasters and supply disruptions from Japan’s earthquake — will likely prove temporary. And they recall that the economy shrugged off a similar mid-year slowdown in 2010, in part because the Federal Reserve embarked on a program to keep interest rates at historic lows.
But for now, signs of a more sluggish stage of the economy are spreading. The Dow Jones industrial average plunged nearly 280 points Wednesday, or 2.2 percent, wiping out more than one-fourth of the year’s gains. The Dow’s plunge followed news that:
• U.S. manufacturing output expanded in May at the slowest pace in 20 months.
• The payroll firm ADP said private employers added a net total of just 38,000 jobs in May, the lowest figure since September and down sharply from April’s 177,000.
• Auto sales tumbled last month after surging earlier in the year.
• Construction spending remained scarcely above its lowest level in more than a decade.
The ADP numbers, in particular, led economists to turn gloomier about Friday’s government report on unemployment and job creation for May. Hiring has been robust in recent months, averaging a net 233,000 each month since February.
Now, confronted with evidence that the economy is sputtering, the research firm IHS Global Insight is slashing its forecast for net jobs created in May from 175,000 to 135,000.
Wednesday’s news follows a wave of downbeat reports. Thirteen economic indicators, from homes sales to factory orders to personal spending, came in weaker than expected during May.
J.P. Morgan, citing the tepid reports on auto sales and construction, on Wednesday cut its forecast for growth for the April-June period for the second time in two weeks. It now expects the economy to expand at an annual pace of just 2 percent from April to June, down from its earlier forecast of 2.5 percent.
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