US growth predictions downgraded

Revelations that key sectors of the US economy were pummeled last month have rekindled fears that the world's largest economy faces protracted high unemployment and lacklustre growth.

Exactly two years after the recession officially ended, weakness in the jobs, housing and manufacturing sectors left economists scrambling to downgrade their growth predictions on Wednesday.

"This week is the most important week for assessing the strength of the May economy, and growth is looking much softer than we were forecasting," said John Ryding and Conrad DeQuadros of RDQ Economics.

Confidence was buffeted early in the week by news that house prices have fallen below levels seen during the "Great Recession".

Compounding that, private sector job growth slowed in May to the lowest rate since September 2010 and the manufacturing sector suffered one of sharpest decelerations in decades.

Most economists now predict growth to be well under three percent for the second quarter, a sclerotic rate of recovery from the deepest recession in eight decades.

The grinding pace of growth is likely to spell further pain for the 13.7 million Americans who are out of work.

The head of the Federal Reserve's Cleveland region, Sandra Pianalto, on Wednesday lamented that just 1.8 million of the nine million jobs lost in the recession have been recovered and warned of a long slog ahead.

"I anticipate it could take about five years for unemployment to reach its long-run sustainable rate of 5.5 to six percent," she said.

Private payrolls firm ADP on Wednesday said the private sector added a measly 38,000 jobs in May, almost one-fifth of what was expected.

That led Moody's Analytics to downgrade its expectations for May's official job creation figures, released Friday, to a paltry 80,000 from an originally forecast of 175,000. The official figures include data on jobs in the public sector, which has faced tough cuts.