Hiring may be slowing after months of healthy job gains that helped drive economic growth.
The government's May jobs report, to be released Friday, is expected to cement evidence that the economy has weakened in the face of high energy prices, scant pay raises and a depressed housing market. Analysts have been rushing to scale back their forecasts for job creation.
Despite those worries, the government has shifted away from economic stimulus and is focused on debt reduction. The Federal Reserve isn't expected to take any further steps to spur growth. Persistent economic weakness could also imperil President Barack Obama's prospects in the 2012 election.
Pressure to focus on debt reduction was heightened Thursday by a warning from Moody's Investors Service. The credit rating agency said it might downgrade the nation's credit rating if the government failed to make progress in raising the debt limit in coming weeks. Republicans say they will agree to raise the limit only if Democrats back deep spending cuts.
"There are reasons to be worried," said Michelle Meyer, an economist at Bank of America Merrill Lynch. "It appears there's not much desire to do more in Washington even as the economy weakens."
Higher gas prices have left less money for consumers to spend on other purchases, like furniture, appliances and vacations. And average wages aren't even keeping up with inflation. As a result, consumer spending, which fuels about 70 percent of the economy, is growing sluggishly.
Oil prices soared from about $70 a barrel last summer to as high as $115 this spring. They were driven up by turmoil in the Middle East and rising demand in developing countries. More expensive oil sent gas up to nearly $4 a gallon nationwide, though both oil and gas prices have ticked down in the past few weeks. Gas averaged $3.78 a gallon Thursday, according to AAA.
Higher prices for energy and raw materials have also left businesses increasingly cautious about hiring and expanding. And growth in manufacturing output weakened last month, in part because the March earthquake in Japan disrupted supplies of electronic components and other parts. Those disruptions have also reduced auto production and sales.
The nation's unemployment rate stands at 9 percent. It's expected to dip to 8.9 percent for May, but most economists will be focused on the job-creation figures.
In recent days, economists have sharply reduced their expectations for hiring in May. Nomura Securities now projects a gain of 85,000, down from 175,000 earlier this week. The consulting firm High Frequency Economics cut its estimate to only 50,000, from an earlier target of 200,000.
Those figures are much lower than average job gains of about 230,000 in the past three months, the strongest hiring spree in five years.
A slowdown in hiring could weaken the economy for the rest of year, even as temporary factors such as the disruptions from the Japan earthquake fade.
"We do believe there's a slowdown in the underlying momentum of the economy," Meyer said.
Bank of America Merrill Lynch thinks the economy will grow at a 2 percent pace in the April-June quarter, and then rebound to a 3 percent pace in the July-September period. The rebound would be stronger if the economy were facing only temporary problems, Meyer said.
Fewer jobs could cut into consumer spending, threatening overall growth for the rest of this year and next, Goldman Sachs economist Jan Hatzius wrote in a note to clients.
The stock market was mixed Thursday, a day after it fell by the sharpest amount since August due to rising concerns over the economy.
Nariman Behravesh, chief economist for IHS, thinks the economy will pick up once gas prices decline further and Congress and the White House resolve their conflict over the debt ceiling.
More evidence of the economy's weakness surfaced Thursday:
_ The number of people applying for unemployment benefits remains stuck at a level that signals weak job growth.
_ Factories received fewer orders for computers, autos, industrial machinery and other goods in April.
_ Small businesses are hiring less. May marked a second month of weakness after solid gains in February and March.
So what happens now? In the short run at least, not very much.
Many economists think the nation would have to start losing jobs again before the Federal Reserve would be willing to pump more money into the economy.
Until the acrimonious debate about whether to raise the debt limit and slash spending is resolved, many companies will be wary about spending more of their cash hoard, Behravesh said.
When the debt-ceiling issue is resolved, he said, "businesses might feel less uncertainty about the outlook, and be more willing to get out there and invest and hire."