WASHINGTON (AP) — Fears of an economic slowdown are
heightening anticipation of what Friday’s U.S. jobs report for January
might reveal.
Stock markets have sunk after signs of weaker growth
in the United States, Europe and China. Turmoil in developing countries
has further spooked investors. The upheaval has renewed doubts about
the Federal Reserve’s next steps.
Evidence of healthy U.S. job
growth would help soothe those jitters. It would suggest that the
world’s biggest economy is still expanding solidly enough to support
global growth.
"The best antidote right now for all these problems
is a robust U.S. economy," said Carl Riccadonna, an economist at
Deutsche Bank. "The whole world is watching, even more so than usual."
Yet
anyone looking to Friday’s report for a clear picture of the U.S.
economy’s health might be disappointed. Unseasonably cold winter weather
could distort January’s hiring figures. Revised estimates of job growth
last year and the size of the U.S. population might further skew the
data.
Another complication: A cutoff of extended unemployment
benefits in December might have caused an artificial drop in January’s
unemployment rate and perhaps a misleading snapshot of the job market’s
health.
"Just when we need it most, the employment report may fall short," Riccadonna said.
All
the anxiety marks a reversal from a few weeks ago, when most analysts
were feeling hopeful about the global economy. U.S. growth came in at a
sturdy 3.7 percent annual pace in the second half of last year. The Dow
Jones industrial average finished 2013 at a record high. Europe’s
economy was slowly emerging from a long recession. Japan was finally
perking up after two decades of stagnation.
Yet in just the past
few weeks has come a barrage of dispiriting economic news. U.S. hiring
slowed sharply in December. Employers added just 74,000 jobs, barely a
third of the average gain in the previous four months.
On Monday,
an industry survey found that manufacturing grew much more slowly in
January than in December. A measure of new orders in the report
plummeted to the lowest level in a year. That report contributed to a
dizzying 326-point plunge in the Dow Jones industrial average.
Also
Monday, automakers said sales slipped 3 percent in January. And last
week, the government said orders to U.S. factories fell in December. So
did signed contracts to buy homes, according to the National Association
of Realtors.
A gauge of China’s manufacturing fell to a six-month
low in January. And a report Wednesday said retail sales in the 18
European countries that use the euro fell in December by the most in 2½
years.
For all that, most economists remain relatively optimistic
about U.S. growth. They attribute the recent weakness in the United
States in part to unseasonably cold weather, which disrupted trucking
and shipping. The weather might have lowered hiring in December by up to
50,000 jobs, according to several economists’ estimates. Few Americans
want to test-drive cars or search for a new home in poor weather.
"I
think the US economy is still doing just fine," said Bob Baur, chief
global economist at Principal Global Investors. "Maybe people are
overreacting a bit."
Baur still thinks U.S. growth will come in at nearly a 3 percent pace this year. That would be the best
showing since 2005.
Growth
at that level would also be enough for the Fed to continue winding down
its monthly bond purchase program, Baur said. The Fed is buying $65
billion in bonds this month to try to keep interest rates low and
encourage borrowing and spending. It has pared those purchases from $85
billion in December. Fed officials have said they will likely end the
purchases by year’s end if the economy improves further.
Some
positive signs have emerged. A survey of service sector companies,
including retailers, banks and restaurants, found that they grew faster
in January than in December. The service companies, which represent
about 90 percent of all private firms, also stepped up hiring, the
survey found.
And payroll processor ADP said Wednesday that
businesses added 175,000 jobs in January. That’s roughly in line with
the average monthly gains of the past two years. It suggests that hiring
could have rebounded a bit from December’s disappointing result. Still,
ADP’s figure was also lower than the 227,000 jobs it said were added in
December.
Yet ADP’s figures cover only businesses and frequently diverge from the government’s more comprehensive
count.
Another
unknown is the effect of the expiration of emergency unemployment
benefits on Dec. 28. Benefits for about 1.4 million unemployed were cut
off. Many of those people might have given up on their job searches in
January. They had been required to look for work to receive benefits.
People
out of work aren’t counted as unemployed unless they’re actively
seeking work. If many people stopped looking for a job last month after
their benefits ran out, the number of unemployed would fall. And so
would the unemployment rate.
There’s no way to know how all these different trends will affect Friday’s report.
"We
view this month’s (jobs) results as pretty much of a crapshoot," said
Joshua Shapiro, an economist at MFR Inc., a forecasting firm.
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Contact Chris Rugaber at http://twitter.com/ChrisRugaber
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