Tuesday June 5, 2012

WASHINGTON (AP) -- Faced with a fizzling job market, many economists have turned more pessimistic and no longer think U.S. economic growth will accelerate later this year.

Friday's surprisingly bleak jobs report for May followed a spate of weak U.S. economic data last week. Manufacturing activity slowed, an index of home contracts fell and consumer confidence tumbled. Mounting troubles in Europe and elsewhere have heightened economists' concerns.

Julia Coronado, an economist at BNP Paribas in New York, said she now expects growth of 2.2 percent this year, down from her previous forecast of 2.4 percent. She also revised down her estimate of growth in the April-June quarter to a 2.2 percent annual rate, from a 2.5 percent rate.

"We keep hoping that we're going to turn a corner and move into a stronger phase of recovery, and the door keeps getting slammed shut," Coronado said.

After the jobs report Friday, JPMorgan Chase sharply reduced its growth forecast for the July-September quarter to a 2 percent annual rate, down from 3 percent. It cited the weaker U.S. hiring and a likely drop in U.S. exports related to slower growth overseas.

And JPMorgan Chase now forecasts growth of 2.1 percent for 2012, down from 2.3 percent.

Forecasting firm Macro economic Advisers and Swiss bank UBS have also marked down their expectations since Friday's jobs report.

As a general rule, it takes about 2.5 percent growth to generate enough hiring to keep up with population growth and prevent the unemployment rate from rising. The reduced forecasts suggest that hiring may not strengthen much this year.

Still, some trends remain positive for the U.S. economy. Gas prices have been falling, which puts more money in Americans' pockets. With mortgage rates at record lows, more Americans are buying homes. Builders have increased spending on construction. Auto sales are up.

Maury Harris, chief U.S. economist at UBS, said the weak May jobs report shows businesses are nervous about the economic outlook. Yet consumers remain willing to spend.

Jack Kleinhenz, chief economist at the National Retail Federation, says he's sticking with the group's annual retail sales growth forecast of 3.4 percent for now.

"I'm concerned, but I am not ready to put up a red flag on everything," Kleinhenz said.