Hiring strength amid weakness?

Despite the economy's recent soft patch, the April jobs number could be surprisingly strong.

May 5, 2005: 3:14 PM EDT
By Chris Isidore, CNN/Money senior writer
 
NEW YORK (CNN/Money) - Hiring has been surprising weak during some of the strongest periods of economic growth in recent years.

So with the economy growing at its slowest pace in two years in the first quarter, just what are the chances of a strong jobs report from the Labor Department Friday? A lot better than you might think, according to many economists.

On average, the economists think employers added 175,000 jobs to payrolls in April, up from 110,000 reported in March, according to a survey by Briefing.com. Reuters, in its own survey, produced an average forecast of 170,000 new jobs, with one forecast as high as 325,000.

The unemployment rate is expected to stay at 5.2 percent.

Average payroll growth has been 125,000 jobs a month the last two years, below the 150,000 economists say is needed to keep up with population growth. Since last June, that average has risen to 155,000, but that's still fallen short of economists' forecasts eight of the 10 months.

The high payroll estimate for April is from Brian Jones, economist with Citigroup. He cited some unique things about the April report, including a longer-than-normal survey period, as well as improved fundamentals, including a drop in the number of people getting unemployment benefits.

"I think the soft patch thing will be short-lived," he said. "I think this will be the first in a series of good economic reports for April."

David Kelly, economic adviser for Putnam Investments, said relatively modest productivity gains suggest employers are having to add jobs, rather than squeezing more out of existing workers, as they were earlier in the current economic expansion.

"Even though economic reports show a slowing down, we're at the stage of the expansion when the jobs numbers will look better than economic activity," he said.

Even some who are looking for a modest jobs number Friday concede there could be an upside surprise.

"I've heard a lot of discussion the number could come out stronger," said John Silvia, chief economist with Wachovia Securities, who's forecasting a net gain of 180,000 jobs for April. "We have different models, and a couple of them have estimates where the number is higher."

Other analysts point to other indicators, such as softer employment readings from surveys of executives and the slowdown in first-quarter GDP growth, as signs that this won't be a great month for jobs. But many of those economists are looking for improvement ahead, rather than continued softness.

"I think we will get that bump. I think this is temporary," said Anthony Chan, senior economist with JPMorgan Asset Management. "My forecast at the beginning of the year still stands for 2.5 million new jobs. But I certainly do see a soft patch here."

Of course it's possible that hopes for improved hiring will get swamped by the first quarter's "soft patch," caused mainly by rising energy and commodity prices. And the current worries about the strength of the economy could themselves hit hiring plans of employers who believe slower sales are ahead.

Rich Yamarone, director of economic research at Argus Research, has the lowest estimate in the Reuters survey: just 140,000 jobs added in April. And he said he could see the number falling well short of even that bearish forecast, perhaps as low as 20,000 or 25,000 new jobs.

"Corporate America was spinning its wheels in the first quarter. That doesn't make them go out and flick on the hiring switch anytime soon," he said.