WASHINGTON (AFX) - U.S. economic indicators to be released this week are expected to show a weak labor market as the number of jobs lost improves from last month but remains in negative territory, economists said.
They expect non-farm payrolls to shrink by 25,000 jobs -- the third straight month of decline -- and the unemployment rate to hit 4.6 pct. "The third decline in a row certainly suggests that we are on the brink of a recession," said Nomura Securities' Carol Stone, adding "I think we are just barely hanging on."
James Glassman of JP Morgan Chase revised his forecast for job creation to "flat" after earlier expectations that it would be down 100,000 in May.
"There is less weakness, but zero is still weak in my mind," he said, explaining that the revision came from a change in seasonal factors.
Glassman said that Federal Reserve Chairman Alan Greenspan's speech to the Economics Club of New York last Thursday suggested that the Federal Open Market Committee (FOMC), is likely to continue its aggressive stance cutting rates this summer.
Nomura's Stone predicted that the Fed will continue its rate cuts, but at a slower pace.
"What it does mean is they will proceed (with rate cuts), but more gradually," Stone said, adding that the key federal funds rate would be 3.5 pct by the end of summer.
However, she said the half percentage point cut from the current 4.0 pct would come in two parts -- 25 basis points in late June and another 25 basis points in early August.
James O'Sullivan of UBS Warburg said the unemployment rate's expected rise to 4.6 pct is one of many signs that the economy is still struggling.
"Up a tenth a month, it keeps adding up," O'Sullivan said, adding that he expects more weak numbers throughout the summer, and that would be a contraction in output in the second quarter of 2001.
However, he noted that the GDP would return to positive growth by the third quarter.
Following are consensus forecasts of Wall Street economists for data to be released this week.
APRIL CONSUMER SPENDING, PERSONAL INCOME, Tuesday (8.30 am): Economists predict consumer spending will rise 0.4 pct in April, after increasing 0.3 pct in March. Personal income is expected to grow 0.2 pct, after rising 0.5 pct in March.
MAY CONSUMER CONFIDENCE, Tuesday (10.00 am): Economists expect the conference board's consumer confidence May survey to rise slightly to 110, after it fell to 109.2 in April. That would be the second rise in the three months following five straight months of decline, when consumers appeared gloomy about U.S. economic conditions. Greenspan noted last Thursday that it is very difficult to judge and measure consumer confidence accurately.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Economists forecast initial claims for regular state unemployment benefits will fall 2,000 to a seasonally-adjusted 405,000 for the week ended May 26 from the previous week, when they rose 15,000 to 407,000.
MAY NONFARM PAYROLL, Friday (8.30 am): Economists predict data will show that 25,000 new jobs were lost in May after 223,000 jobs were cut in April, the largest decline in non-farm payrolls since Feb 1991. They fell by 86,000 in March.
Economists expect the unemployment rate to reach 4.6 pct in May, after rising to 4.5 pct in April, the highest unemployment rate since Oct 1998. Hourly earning are expected to rise 0.3 pct in May, after a strong 0.4 pct growth in April.
APRIL CONSTRUCTION SPENDING, Friday (10.00 am): The consensus forecast of Wall Street economists is for construction spending to rise 0.3 pct in April, after improving 1.3 pct in March. An April rise would be the sixth consecutive monthly increase.
MAY NAPM, Friday (10.00 am): Economists predict the NAPM manufacturing purchasing manager's index will fall to 43.7 in May, after falling to 47.1 in April.