Gas prices could slow job growth this year

[May 06, 2011]  WASHINGTON (AP) -- A brightened outlook for job growth may dim this spring as rising gas prices weigh on companies and prompt some to rethink their hiring plans.

Analysts' consensus forecast is that the economy added 185,000 jobs in April and that the unemployment rate remained at a two-year low of 8.8 percent. That would be down from the 216,000 jobs added in March but still solid.

Still, just a few weeks ago economists were confident that private companies would add more than 200,000 jobs for the third straight month. Some now worry that the job figures could be weaker than expected, based on the most recent economic data.

"There are risks out there that job growth could slow sharply," said economist Chris Rupkey at the Bank of Tokyo-Mitsubishi UFJ. For now, Rupkey is sticking with his forecast that a net total of 170,000 jobs were created in April. He predicts that private employers added fewer than 200,000 jobs, while local governments shed positions.

But Rupkey is concerned that Friday's jobs figure could fall short of that.

Average gas prices have risen for 44 straight days. Consumers are spending more to fill the tanks, leaving them with less to spend elsewhere. As a result, many companies are feeling less certain about the economy's health.

Oil prices plummeted Thursday to settle below $100 a barrel for the first time since mid-March. But the plunge in oil may be enough only to keep pump prices from reaching a national average of $4 a gallon

The number of people applying for unemployment benefits last week jumped to an eight-month high.

Also, the economy slowed sharply in the first three months of this year. A big reason: High gas prices weakened consumer spending.

That also affected the U.S economy's service sector, which grew last month at the slowest pace since August. Service companies, which employ nearly 90 percent of the work force, cited a decline in customer demand.

Most analysts agree that the economy has strengthened enough to keep growing this year. And many say the factors that held back growth at the start of the year were most likely temporary. They predict growth will pick up over the rest of the year.

There have been some positive signs. Retailers reported strong April sales, helped by a late Easter. Auto companies reported brisk sales. And factories have expanded production this year at the fastest pace in a quarter-century.

Economists' prediction for a pickup in overall growth is based, however, on gasoline prices stabilizing in the months ahead and then dropping to around $3.50 a gallon or lower near the end of the year.

The national average was $3.99 a gallon on Thursday, according to the AAA.

If gas prices keep rising, consumers are likely to spend less on other goods and services. That could prompt companies to hire fewer workers.

Bill Cheney, chief economist at John Hancock Financial Services, said he thinks the economy added around 200,000 jobs in April and is forecasting similar gains in the coming months. A Social Security tax reduction is giving people extra cash to help blunt the impact of higher gas costs, he says. Fatter stock portfolios are also cushioning the blow.

Private companies added more than 200,000 jobs in both February and March, the biggest two-month hiring spree since 2006.

"High gas prices are a big headwind for the economy. It's sucking money out of people's wallets," Cheney said.

[Associated Press; By JEANNINE AVERSA]

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