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Job Creation Not Going Smoothly

The latest ADP report shows that adding jobs and getting more Americans back to work is proving more difficult than anticipated.

The private sector added just 135,000 new jobs in May, and a separate job report showed growth in the services sector was slow last month.

The reports come just two days before the government releases its own jobs report, in which non-farm payroll jobs are expected to come in at 170,000.

Bob Brusca, the Chief Economist for Fact and Opinion Economics, said, “These reports have come in on the weak side, and it looks like the sort of a 170 (thousand), 175 (thousand) number that people were looking for is a little bit beyond the reach for the headline of this job report. So I think we are going to see a little bit of a weaker number. I think we’ll see a headline of 150 (thousand). We’ll see private jobs around 160 (thousand), and the risk now is that they will be weaker than that.”

And the weak job numbers only compounded the fears of investors worried that the Fed may cut back its bond buying.

“The Fed has just been looking at this breadth of job numbers in the same range, and finally decided, ‘oh, look at these numbers. Well I guess this is where we are. This is normalcy, and we are staying here and we are not slipping down. I guess we better adjust to this new reality.’ So, it’s not that the economy needs to get that much better. It’s just that it needs to not slip,” says Brusca.

There are signs of slippage elsewhere, such as in the mortgage industry.

Kevin Cummins of UBS said, “That does jeopardize the one part of the economy that seems to be leading here in the U.S. is housing. And a backup in mortgage rates certainly would jeopardize the strength of the recovery that we are so far have had in the housing sector.”