May 6, 3:01 AM EDT

Strong hiring but weak growth: Can steady US job gains continue to defy a slow economy?



Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Strong hiring but weak growth: Can steady US job gains continue to defy a slow economy?

A key economic indicator is showing that the U.K, economy is showing that growth is stagnating amid fears of the looming referendum on whether Britain should remain in the European Union

Egypt has extended the suspension of a capital gains tax on the stock market until May 2017

Survey: Growth at US services firms strengthened in April after economy's weak start to 2016

Germany has raised its forecast for government tax income this year and beyond thanks to a healthy economy and low unemployment, bolstering its insistence that it can continue to avoid running up new debt

As winter turned to spring, the eurozone economy appears to have lost some _ but by no means all _ of the momentum that saw it grow faster than the U.S. in the first quarter of the year

A spiraling Puerto Rico debt crisis reaches a new milestone as the island misses nearly $370 million in bond payments and officials warn of worse to come if Congress doesn't help it dig out from a mountain of debt

Investor Warren Buffett says Federal Reserve generally doing a good job with fiscal policy, but it's hard to predict all the effects of prolonged low interest rates

A private survey says U.S. manufacturers expanded in April for the second straight month, suggesting that factories are adapting to a strong dollar and economic weakness overseas

The eurozone economy has grown back to the size it was back in 2008 _ here's a look at some other key indicators for the 19-country bloc, comparing its situation eight years ago with where it is now

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

WASHINGTON (AP) -- U.S. employers have been hiring at a healthy clip for six months even as the economy has slowed to an anemic pace. Friday's jobs report for April will help answer a key question:

How long can this go on?

At least a while longer, most economists think. They have collectively forecast that the economy added 200,000 jobs last month and that the unemployment rate remained a low 5 percent, according to data provider FactSet.

Though that gain would fall shy of the robust monthly increase of 246,000 jobs over the past six months, it would still point to a sturdy job market in which employers are hiring steadily and laying off few.

What's surprising about the solid pace of hiring is that it coincides with such tepid economic growth. The economy expanded at just a 1 percent annual rate over the past six months. Weak growth, in the United States and overseas, has led to volatility in financial markets and complicated the Federal Reserve's plans, launched in December, to gradually raise interest rates.

The disparity between growth and hiring has led some economists to question the validity of the government's measure of economic growth.

In the January-March quarter, annualized growth was just 0.5 percent, the weakest in two years. It's become a pattern: Between 2010 and 2015, growth has averaged 0.8 in the first quarter but 2.6 percent in the second through fourth quarters, according to IHS, a consulting firm.

Economists blame the government's efforts to seasonally adjust its economic growth data. It's a process that seeks to filter out predictable effects, such as a spike in shopping during the winter holidays. Those adjustments may be artificially depressing first-quarter growth.

Other factors may contribute. Jim O'Sullivan, an economist at High Frequency Economics, notes that low oil prices have triggered sharp cutbacks in drilling by energy firms. But though oil and gas drilling requires heavy machinery, it does not require high numbers of workers, even in the best of times.

O'Sullivan calculates that sharp reductions in drilling have lowered gross domestic product, the broadest gauge of goods and services, by 0.5 percentage point over the past year. But he thinks the hit to employment has just been one-tenth of a point.

Many economists say jobs are easier to count than economic output is. The growth of the economy is increasingly driven by high-tech and online services, such as Google and smartphone apps, which are largely free and hard to quantify. That suggests that growth figures may be revised higher in the future or will rise in coming months to more closely align with hiring.

There are signs that the economy's growth hasn't been as weak as the data suggests. Consumer spending rose at a 1.9 percent annual rate in the first quarter - a modest gain but much faster than overall economic growth. Better consumer demand could lift growth in the coming quarters.

Still, there's one clear reason for concern: Solid hiring amid tepid economic growth suggests that workers are less efficient. That means companies will have to hire more. That trend might boost job growth in the short-run, but it threatens U.S. living standards over time.

That's because productivity - the amount of output per hour of work - is a key source of income gains. When workers are more efficient, companies can raise pay without having to raise prices for their customers.

Yet productivity has risen at an average of just 0.5 percent a year in the past five years, far below the long-run average of 2 percent. That helps explain why many Americans have received such meager pay raises since the recession ended in 2009.

Weak growth overseas and a strong dollar have cut into U.S. exports of factory goods, which has hobbled manufacturers and restrained the economy. Factories shed 29,000 jobs in the first three months of 2016.

There are some signs the economy could be improving. Auto sales picked up in March, suggesting that Americans are still willing to make large purchases.

And a private survey found that services firms, which include retailers and restaurants as well as professional services such as engineering, expanded in April at the fastest pace this year.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.