Swonk shaved her second quarter forecast for GDP to 2.4 percent, above the 1.8 percent of the first quarter. However, she expects a pickup in the third and fourth quarter. "Even if we can stabilize in sort of a 3 percent growth range by 2012, that's nothing to write home about. This is not an easy economy unless we're generating more jobs," she said.
States and local governments should continue to show job losses, especially as federal stimulus funds have wound down. "There could be a bigger teacher hit. State and local has been weak and that's going to continue to be a headwind as we move through the year," she said.
Economists also see the impact of spiking oil and gasoline prices as abating, now that gasoline prices are falling. The national average Thursday was $3.78 per gallon, down from $3.98 on May 13, according to AAA.
"The transitory stuff should be a blip on the radar screen if the recovery was less fragile...If you're skating on thin ice, do you want to see it melt and see it get warmer? That's kind of what we're in the middle of right now. While I don't think a double dip is probable, I can see why people are worried about it," Swonk said.
She also said it's unclear when the 50,000 hires added by McDonald's in a well-publicized one day hiring spree would show up in the May jobs report.
Swonk forecasts 130,000 jobs for May, with 155,000 coming through private sector hirings. The rising price of fuel and other commodities impacted hiring. "Retailers couldn't pass along the price increases like they thought they could. Wal-mart couldn't pass along price increases. So I guess that hits your margins, and you can't hire as many people," she said.
"Family restaurants aren't hiring. They have to offer value meals," she said.
Barclays Capital chief U.S. economist Dean Maki expects to see 190,000 new jobs were added in May. "Recent data releases do suggest some downside risk. On the other hand we saw continued high levels on ISM employment index, and jobless claims are really not showing a significant deterioration in the labor market. The only thing that would point to much weaker report would be the ADP report, but we have not found that to be very predictive on a month to month basis," he said.
Maki said he is waiting to see the May jobs report before he tweaks his view on the second quarter.
LaVorgna said one possible bright spot that may start to translate into hirings soon are early signs of improvement in construction spending. In April, private non residential construction was up 9.3 percent, relative to the first quarter average, which fell at a rate of 17 percent. Residential investment is up 3 percent relative to the first quarter average. This also coincides with a pickup up in commercial real estate lending in the Fed's senior loan officers survey. "That's important because those are leading indicators," he said.
Swonk said the tornados and storm destruction in the midwest and elsewhere this spring should also result in some pickup in construction activity.
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