July 6, 2012 / 4:13 AM / 5 years ago

U.S. hiring seen stuck in low gear in June

People wait in line to be processed during a summer city employment event in New York June 4, 2012.Eric Thayer

WASHINGTON (Reuters) - U.S. employers likely quickened the pace of hiring last month but not enough to allay worries that Europe's debt crisis is shifting the economy into low gear.

The Labor Department is expected to say on Friday that non-farm payrolls expanded by just 90,000 jobs in June, according to a Reuters survey of economists.

That would be stronger than May's increase of 69,000 jobs but still tightens the vise on President Barack Obama's re-election bid before the November vote.

"There's just not a lot of momentum in the economy," said Sam Bullard, an economist at Wells Fargo & Co in Charlotte, North Carolina.

Mitt Romney, Obama's Republican challenger, is focusing his campaign on the weak jobs market that has dogged Obama's presidency.

Most economists believe job creation in June was too weak to bring down the lofty 8.2 percent unemployment rate. That might push the Federal Reserve closer to taking new actions to lower borrowing costs to encourage companies to increase hiring.

Debt woes have bogged down much of Europe, sending some countries into recession. The euro zone crisis in turn has dulled economic growth around the world from China to Brazil. A survey on Monday found U.S. manufacturing contracted for the first time in nearly three years in June.

Europe is not the only worry weighing on the U.S. outlook. Washington plans enough belt-tightening at the start of 2013 to easily send the economy into recession. Cautious observers wonder if lawmakers can avoid this "fiscal cliff."

"Firms are saying, 'Is there really a reason to ramp up hiring right now?'," said Bullard.

Job creation slowed for four straight months through May. Part of the slowdown could be because mild weather led companies to boost hiring in the winter at spring's expense.

But recent weakness in everything from retail sales to business sentiment suggests something more fundamental is at play.

"We're not expecting things to take off in the second half of the year," said Sara Klein, an economist at Moody's Analytics in West Chester, Pennsylvania. "Weather wasn't the only factor."

STORM BREWING

Until recently, the United States had been a relative bright spot in the global economy, especially in manufacturing. Most economists still expect lackluster growth over the rest of 2012 rather than a slip toward recession.

But economic weakness abroad has lately become a formidable hurdle, as Obama has acknowledged, and global policymakers are acting like a storm is brewing.

China, the European Central Bank and the Bank of England all eased monetary policy on Thursday, raising speculation they had coordinated their action.

The Fed eased policy further last month, but the recent run of weak data has fueled speculation the U.S. central bank could deliver more stimulus when its next meeting concludes on August 1.

Even though June's pace of hiring is expected to be weak, the Fed might not want to unveil bold new measures now because the real storm could be months down the road.

"Hiring isn't as strong as earlier this year ... but not to the point where you see obvious need for Fed action," said Cooper Howes, an economist at Barclays in New York.

Reporting by Jason Lange; Editing by Kenneth Barry

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