WASHINGTON — The economy is tiring again.
Reports Wednesday on manufacturing and company hiring were so weak that many economists immediately downgraded their forecasts for Friday’s jobs report for May. Some analysts also slashed their estimates for growth in the April-June quarter.
“We’re definitely in a soft patch,” says Steve Blitz, senior economist for ITG Investment Research.
No one knows whether the slowdown is a temporary setback or the start of a prolonged period of anemic growth. Many analysts hold out hope that the economy will rebound in the second half of 2011.
They say some of the problems restraining growth now — high oil prices, U.S. natural disasters and supply disruptions from Japan’s earthquake — will likely prove temporary. And they recall that the economy shrugged off a similar mid-year slowdown in 2010, in part because the Federal Reserve embarked on a program to keep interest rates at historic lows.
But for now, signs of a more sluggish stage of the economy are spreading. The Dow Jones industrial average plunged nearly 280 points, or 2.2 percent, wiping out more than one-fourth of the year’s gains. The Dow’s plunge followed news that:
-U.S. manufacturing output expanded in May at the slowest pace in 20 months.
-The payroll firm ADP said private employers added a net total of just 38,000 jobs in May, the lowest figure since September and down sharply from April’s 177,000.
-Construction spending remained scarcely above its lowest level in more than a decade.
The ADP numbers, in particular, led economists to turn gloomier about Friday’s government report on unemployment and job creation for May. Hiring has been robust in recent months: It’s averaged a net 233,000 each month since February. And the unemployment rate has tumbled from 9.8 percent in November to 9 percent in April.
Now, confronted with evidence that the economy is sputtering, the research firm IHS Global Insight is slashing its forecast for net jobs created in May from 175,000 to 135,000. Joshua Shapiro, chief U.S. economist at MFR Inc., is cutting his even more — from 185,000 to 75,000.
Wednesday’s news follows a wave of downbeat reports. Thirteen economic indicators, from homes sales to factory orders to personal spending, came in weaker than expected during May.
The economy seems to be tracing the path it took last year. Growth was strong at the start of 2010. But the economy stalled in the spring, in part because Europe’s debt crisis rattled financial markets. By fall, it had regained strength.
Some economists foresee a similar rebound from this year’s midyear lull. They expect the economy to snap back in the final six months of the year as commodity prices dip, states recover from the recent natural disasters and Japanese factories resume production.
“Some of those temporary factors will reverse themselves,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Still, some economists worry that the government is withdrawing support for the economy. The Federal Reserve this month is ending its $600 billion Treasury bond-buying program. The bond purchases have been intended to lower rates on loans and lift stock prices, spurring more spending and invigorating the economy.