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 for 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 probably prove temporary. And they recall that the economy shrugged off a similar midyear 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, 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.
• Payroll firm ADP said private employers added a net total of 38,000 jobs in May, the lowest figure since September and down 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. And the unemployment rate has tumbled from 9.8 percent in November to 9 percent in April.
David Resler of Nomura Global Economics suggested that the economic aftershocks from Japan’s massive quake and tsunami have caused more damage than initially expected.
The industrial slowdown has squeezed contractors that do business with U.S. manufacturers. That’s one reason ADP calculated few new jobs last month at service companies.
“We’re seeing a knock-on effect,” Resler says. “A wide range of services companies depend upon manufacturing — trucking, retailing, warehousing, accounting services.”
