US jobless claims fall but hiring remains hurdle

Signs that layoffs in the United States may be easing, according to data published Thursday, raised hopes for the troubled jobs market, but weak hiring remains the biggest roadblock to recovery. Faced with a sluggish domestic economy and threats to growth from Europe's debt crisis and China's slowdown, employers have been reluctant to add jobs amid the uncertainty. A day ahead of the government's keenly awaited June labor data, the Labor Department reported a better-than-expected reading on initial claims for unemployment benefits. New jobless claims -- an indicator of the pace of layoffs -- fell by 14,000 to 374,000 in the week ending June 30, the lowest reading since mid-May. Another indicator, planned layoffs, fell to a 13-month low in June, and were 39 percent lower than the announced job cuts in May, global outplacement consultancy Challenger, Gray & Christmas said. "Even with recent signs that the economy is headed for another summer slump or worse, including the first contraction in manufacturing activity in three years, employers appear reluctant to shed too many workers," said John Challenger, the company's chief executive. Yet the problem is that even as layoffs may be easing, hiring remains dull. In Friday's much-awaited June jobs market data release, analysts expect the unemployment rate to come in unchanged at 8.2 percent, with just 100,000 jobs added last month, after a meager 69,000 in the prior month. "With the pace of job cuts generally improved from the height of the recession and closer to a level consistent with growth, it is a lack of hiring that remains the biggest hurdle for the labor market," said Sara Kline at Moody's Analytics. The fresh data on layoffs does hold out some promise, given the economy's weakness. "While tomorrow's employment numbers may not be great, it is beginning to look like the labor market is not nearly as weak as feared," said Joel Naroff of Naroff Economic Advisors. Kline pointed to data from payrolls company ADP, which said on Thursday that the US private sector added 176,000 jobs in June, 29 percent more than in May and better that economists' forecasts. "In conjunction with the morning's upside surprise from ADP about net private-sector job creation in June, the lower initial jobless claims number... does bode well for strength extending into July," she said. Nevertheless, there are recent signs of slowing growth in the economy from the first quarter's anemic 1.9 percent pace. On Thursday, the Institute for Supply Management delivered its second jolt of negative growth news for June. After reporting Monday that manufacturing fell for the first time in three years, the ISM said that growth slowed in the services sector, which accounts for two-thirds of the world's largest economy. The ISM's non-manufacturing index fell to 52.1 percent last month from 53.7 percent in May. A reading above 50 indicates growth in activity in the non-manufacturing sector, which accounts for about 70 percent of the US economy. A number below 50 means contraction. "The number of industries reporting growth has declined steadily since March, which is the month that job growth started slowing as well," said Jennifer Lee at BMO Capital Markets.