Economists see a modest pickup in hiring

NEW YORK (CNNMoney.com) -- The outlook for the job market has improved, according to a survey of leading economists released Monday, even as the economic recovery hit a speed bump in the second quarter.

In its second-quarter industry survey, the National Association for Business Economics said employers grew payrolls for a second consecutive quarter this year. The percentage of firms increasing staff levels grew to 31% in the quarter, versus only 6% in the same period a year ago.

At the same time, the percentage of employers cutting jobs continued to move lower.

Looking ahead, the survey showed that 39% of companies expect to add employees over the next six months, the highest level of planned hiring since January 2008.

"The labor market continued to improve, with increases in current hiring and a rise in the percentage of firms planning to add workers over the next six months," William Strauss, an economist at the Federal Reserve Bank of Chicago, said in a statement.

The jobs outlook is encouraging news for American workers. The U.S. unemployment rate stands at 9.5% as of June. The jobless rate has averaged 9.7% over the first half of the year, and many economists expect it to remain elevated into 2011.

But the survey, based on responses from 84 NABE economists who work for private-sector firms and industry trade associations, also indicated that the pace of the economic recovery slowed in the second-quarter.

Industry demand grew at a slower pace in the quarter, the survey said. Corporate profits grew as price and cost pressures remained tame. About one out of four firms increased capital spending versus the previous quarter, and a growing number expect to continue investing over the next 12 months, according to NABE.

While economic activity is expected to remain positive this year, more economists lowered their expectations for 2010 gross domestic product. Only 20% of prognosticators expect GDP will grow more than 3% this year. That's down from May, when 24% expected such growth.

Still, the majority of economists in the survey expect GDP will top 2% for the year.

In the first quarter, GDP grew at an annual rate of 2.7%, according to government estimates.

Meanwhile, the economists warned that the debt crisis in Europe could hurt U.S. businesses in the months ahead.

Concerns about the fiscal health of several members of the European Union have roiled financial markets this year as countries such as Greece, Spain and Portugal have been hit with downgrades of their sovereign debt ratings. The turmoil has raised concerns that a slowdown of the European economy could hurt the U.S. recovery.

"Credit and debt issues in Europe will likely negatively impact just over a third of the surveyed firms over the next three months," said Strauss.

A recent spate of dour reports on the job market, weakness in housing and consumer spending have stoked worries that the U.S. economy could sip back into recession later this year. Some economists have expressed concerns that the U.S. could be in for a prolonged period of slow economic growth.

Last week, the Federal Reserve released minutes from its June policy meeting that showed the central bank has developed a more pessimistic view for economic growth. The Fed expects GDP to grow between 3% and 3.5% this year, down from its earlier expectation of growth as high as 3.7%.