Economy Likely Shed 80,000 Jobs in April
Washington - The economy likely shed more jobs in April as the economy continued to weaken against the backdrop of a deeper deterioration in the housing market and a growing credit crunch.
Economists polled by Reuters ahead of the Labor Department report to be released on Friday at 8:30 a.m. EDT have forecast that the economy lost 80,000 jobs after losing the same amount a month earlier.
That cut in jobs is likely to bring the unemployment rate up to 5.2 percent from 5.1 percent.
"We anticipate that private payrolls will continue to decline in the months ahead, and we expect that the unemployment rate will rise to 5.6 percent by the fourth quarter and then average 5.7 percent in the first half of next year," said Abiel Reinhart, economist with JPMorgan Chase in New York.
The brunt of the job cuts so far this year, nearly a quarter of a million, have come from the manufacturing and housing sector and economists expect this trend to continue.
Typically, in an economic slowdown, the economy loses up to 2 million jobs. So far this year, a quarter of a million jobs have been lost and economists say the trend will continue, particularly as consumers - who fuel roughly two-thirds of economic output - cut back on spending.
"Retail trade employment will continue to face pressure as the consumer struggles, and nonresidential construction employment cuts will probably continue to get worse," Reinhart said. "The financial sector certainly doesn't look like its about to go on a hiring binge."
A separate report out on Wednesday by ADP Employer Services showed that private-sector employers added 10,000 jobs in April. And while this gain was much better than the 60,000 job cuts economists were expecting to see, economists did not expect that Friday's report would show a better picture.
"Plugging the ADP data into our model and allowing for the strong tendency for the official data to undershoot in recent months, we reckon Friday's payroll number will be about -70K, compared to our prior forecast of -100K. This is still easily enough to keep the unemployment rate heading higher," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Over the next year, the economy is likely to see steady job cuts, an average of about 75,000 a month, according to Joseph LaVorgna, chief economist at Deutsche Bank in New York.
"It will not be a deep recession, but it will be only a very most recovery next year," he said, adding that government rebate checks soon to be in the hands of consumers will do little to improve the economy's outlook.
"Rising food and energy prices really do dent consumer spending and while the rebate will help, most of it will go toward filling up the tank," he said.