Declining dismissals, combined with a sustained pickup in hiring, are needed help spur consumer spending, which accounts for about 70% of the economy.
Bigger gains in payrolls would help to more quickly reduce the unemployment rate, which fell in April to a four-year low of 7.5%.
Growth in the U.S. remains too sluggish to cut the jobless rate quickly, leaving it a “long way” from satisfactory levels, former Federal Reserve Chairman Paul Volcker said this week. The unemployment rate may remain above 6% for at least another two years, he said at an event in New York.
The economy may cool to a 1.6% pace this quarter, after growing at a 2.5% rate in the first three months of 2013, according to the median forecast in a Bloomberg survey of economists from May 3 to May 8. The projection reflects the lagged effect from a two percentage-point rise in the payroll tax at the start of 2013 and $85 billion in automatic budget cuts that began on March 1.
For now, consumers are holding up as lower fuel costs combined with rising stock and home values boost buying power. Sales at retailers unexpectedly advanced in April, rising 0.1% after a decrease of 0.5% in March, a report showed earlier this week.