Even as federal budget cuts put the squeeze on government hiring, private employers are creating new jobs at a steady, but painfully slow, pace.
And despite a long list of concerns and uncertainties weighing on small businesses, the biggest supply of new jobs is coming from the nation's smallest companies. The government will offer up the latest tally this Friday with its jobs report for May.
Forecasters had been looking for a net gain of 190,000. But some economists began to pare back expectations after payroll processor ADP reported Wednesday private-sector businesses hired a lower-than-expected 135,000 people last month.
"It is reflective of the continuation of the soft patch that the economy has been going through, but looking forward it seems that we're starting to gain a little bit of traction," said Russell Price, a senior economist at Ameriprise Financial. "And most importantly that's been most evident in consumer spending and consumer attitudes."
The recent strength in consumer spending comes as households have pared down debt and built up savings, helped by rising stock and housing prices. That spending has helped offset the ongoing cuts in federal government outlays known as the sequester, which officially took effect in March.
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As those cuts have phased in, the impact on the overall economy has deepened. That's one reason some forecasters believe Friday's jobs report will show the pace of new job creation falling to the lower end of its recent range.
"The question is: Is it going north to 200,000 (jobs for the month) or is it going south to 150,000?" said Mark Zandi, chief economist at Moody's Analytics. "At the moment, the risks are that it's going to 150,000. And a lot of that is because of the fiscal issues."