There are signs the brutal pace of job losses is slowing, and the economy could even add some private sector jobs this year.
The May employment report, released at 8:30 a.m. Friday, is expected to show a reduction of another 525,000 non-farm payrolls last month, and an unemployment rate of 9.2 percent. If there were new jobs last month, they were added by the government, which hired 60,000 census workers in April.
As bad as it is, this could be the best showing in six months. "Anecdotally, firms are saying things are still really bad but not as bad as the first part of the year. It looks like the worst of it occurred in the first quarter. It's really a question of how these numbers taper off in the next few months," said Stephen Stanley, chief economist at RBS Greenwich Capital.
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"We're looking at moderation, and moderation is still at pretty nasty levels. They're still bad numbers...The trend is in the right direction," said Diane Swonk chief economist at Mesirow Financial.
"There's no question the pace of decline is moderating. We're likely to see positive growth in the second half of the year, and we may even have a turn in employment by the end of the year," she said. However, Swonk expects the unemployment rate to peak in second quarter of 2010. "Even though we start generating jobs, we don't generate enough."
Thursday's report of a very slight decline in the weekly initial and continuing jobless claims encouraged some economists that job losses may have peaked. Continuing claims of 6.735 million fell from 6.750 million the week earlier, the first decline in five months. Initial weekly claims were 621,000, down from 625,000 the week earlier.
"This could be an indication that hiring has started to pick up again, and measures of hiring such as online job advertising indexes have been a little better recently. Such a pickup would be a quite positive sign—but it is still very tentative," Goldman Sachs economists said in a note.
Economists say the unemployment rate is not likely to peak before the end of the year or first half of next year. Unemployment could reach 10 percent or more. It was at 8.9 percent in April.
Some economists had predicted the woes of the auto industry would add to jobless claims as shutdowns by bankrupt General Motors and Chrysler added to the unemployment rolls.
"There's a really interesting story in claims. The fact that we have fallen for the past three weeks, since the initial Chrysler and GM worker filings, we've essentially been able to hold below the March peak in claims, which was 674,000," said Citigroup economist Steve Wieting.
"If we're not seeing substantially more weakness in auto-related claims by next week's numbers, the possibility that the auto industry is going to engender a whole new larger weakness in employment is diminishing. That's already been the case in the last few weeks," said Wieting.