WRAPUP 3-US adds private sector jobs, jobless claims dip

* Private employers added 55,000 jobs in May

* Markets bracing for best gov’t jobs report since 1983

* Service sector grows, adds jobs for first time since 07

* Weekly jobless claims inch down by 10,000 last week
(Updates with detail on retail sales, Fed’s Lockhart, G20)

By Steven C. Johnson

NEW YORK, June 3 (BestGrowthStock) – U.S. private sector employers
added jobs in May and the economy’s dominant services sector
increased payrolls for the first time in more than two years,
building evidence that the labor market was picking up steam.

New claims for unemployment insurance also fell last week,
leaving investors braced for more good news on Friday, when the
government’s employment report is expected to show the economy
added more jobs in May than at any time since September 1983.

“I think these reports show the labor market is in fact
stabilizing. (Private employment) was slightly weaker than
expected but foreshadows a good number tomorrow,” said John
Doyle, currency strategist at Tempus Consulting in Washington.

Private employers added 55,000 jobs last month, according
to the ADP Employer Services report on Thursday, a bit weaker
than forecast but still a sign of improved conditions, analysts
said. April’s job gain was revised upward to 65,000 from an
initially reported tally of 32,000.

Economists expect Friday’s more closely-watched payrolls
report, which includes private and public sector jobs, to show
that the economy added 513,000 jobs in May and the jobless rate
dropped to 9.8 percent from 9.9 percent in April.

Two-thirds of expected hires were likely temporary ones
tied to the 2010 U.S. Census, but such a total would still mark
the most jobs added since September 1983, when employers hired
just more than 1 million new workers. It would also be the
fifth straight month of job gains.

In a separate report, the Labor Department said U.S.
non-farm productivity grew at a 2.8 percent annual rate between
January and March, the smallest advance in a year.

While some companies have held off hiring new workers,
opting instead to add hours for the existing workforce,
analysts said this policy cannot continue indefinitely, leading
to an inevitable increase in payrolls.

“When the recovery first started, businesses could get more
out of their existing workforces, but that’s becoming more and
more difficult,” said Gus Faucher, director of macroeconomics
for Moody’s Analytics in West Chester, Pennsylvania.

U.S. stocks (Read more about the stock market today. ) fell, however, as tepid May sales from Costco
Wholesale Corp (COST.O: ) and other retailers dented optimism
ahead of Friday’s employment data.

In fact, discount chains turned in the best performance in
May, suggesting consumers are being careful with their wallets
despite signs of stronger job growth. [ID:nN03159334]

“There is still a high degree of caution in the markets,”
said Tim Ghriskey, chief investment officer at Solaris
Management. “Many people don’t want to step up in front of the
jobs report.”


Also on Thursday, the Labor Department said initial claims
for state jobless benefits dropped 10,000 to a seasonally
adjusted 453,000.

Service sector employment rose for the first time since
December 2007, the month the United States fell into recession,
the Institute for Supply Management said. [ID:nLDE6521KE]

But while the economy has expanded for three straight
quarters after enduring the worst downturn since the 1930s,
stubbornly high unemployment is eroding President Barack
Obama’s popularity and could hurt his Democratic party in
November’s midterm Congressional elections.

Anthony Nieves, chairman of the ISM non-manufacturing
survey committee, said service sector job growth was “really
good news but warned, “I would want to see how it trends out.”

“Because what everyone is stating is it’s a jobless
recovery, and I can’t emphasize enough the long decline we’ve
had,” he said. “I don’t want to minimize one month of growth,
but I don’t want to get overly optimistic.”

While first-time claims for jobless benefits fell last
week, they remain above levels usually associated with
sustainable employment growth.

What’s more, the number of people still receiving benefits
after an initial week of aid unexpectedly rose 31,000 to 4.67
million in the week ended May 22, the highest since early
April, the Labor Department said.

Graphic on U.S. private employment:


Graphic on U.S. jobless claims:


Graphic on U.S. services sector:




Even with unemployment still high, the U.S. economy is
nearly strong enough to warrant higher interest rates, a top
Federal Reserve official said on Thursday. [ID:nLDE65218O]

Getting the timing right will be tricky, though, as
policymakers in the United States and abroad attempt to shrink
large budget deficits without putting the brakes on growth.

“That is the shared imperative,” U.S. Treasury Secretary
Timothy Geithner said in Washington this week before leaving
for Thursday’s meeting of G20 finance ministers in South Korea.

The U.S. economy grew at an annual pace of 3 percent
between January and March, slowing from a 5.6 percent rate in
the fourth quarter.


(Reporting by Steven C. Johnson and Lucia Mutikani,
additional reporting by Burton Frierson and Ellen Freilich;
Editing by Andrew Hay) (([email protected];
+1 646 223 6346; Reuters Messaging:
[email protected]))

WRAPUP 3-US adds private sector jobs, jobless claims dip