Reuters reported that US companies hired far fewer workers than expected in May 2011 and output in the manufacturing sector slowed to its lowest level since 2009, adding to concerns that the US recovery is running out of steam.
Economists slashed their forecasts for US payrolls report, considered the best barometer of the world's biggest economy, after private sector job growth tumbled to just 38,000, its lowest level in eight months.
Reports were the latest signals that US economic growth remained sluggish in the second quarter after a weak start to 2011.
Factory growth around the world weakened last month, surveys from Europe to Asia showed, raising concerns that important export markets for US companies are drying up. The worse than expected US slowdown could prompt the Federal Reserve to stick with its super easy monetary policies for longer than previously thought.
It also fueled questions about whether the central bank might take the controversial step of embarking on a third round of bond buying to help prop up the economy. The Fed's current program of bond buying, known as QE2, is set to expire at the end of June. Some investors worry about whether the economy is strong enough to grow without it.
JP Morgan cut its estimate for US economic growth in the second quarter for the second time in recent days, lowering it to 2%. I said that "Even with this revision we'd assess the risks as still a little to the downside."
The Institute for Supply Management said its index of national factory activity fell to 53.5 in May from 60.4 the month before, missing economists' expectations for 57.7.
Manufacturing led the economy out of recession, helped by strength in demand from fast growing emerging markets, but countries like China and India are now trying to curb their acceleration. The export gauge of ISM fell to 55.0 from 62.0. Also on Wednesday, General Motors Co and Ford Motor Co reported slightly lower US vehicle sales in May as economic weakness and higher vehicle prices prompted consumers to delay major car purchases.
A separate snapshot of the jobs market showed the number of planned layoffs at US firms rose modestly in May with the government and nonprofit sectors making up a large portion of the cuts.
Data released by PayNet Inc showed that in a silver lining, borrowing by small US businesses surged in April. Small and medium-sized businesses are key to new hiring.
(Sourced from www.reuters.com)
