Economy this week: Jobs, spending, manufacturing, more

The employment report for May headlines a week chock-full of economic news, but those anticipating a strong rebound from rough winter weather may have to wait just a bit longer. Many economists expect a healthy pickup in activity but say it will be gradual.

On Monday, the Commerce Department is expected to report a modest 0.2% gain in consumer spending for April. Spending accelerated a solid 0.4% in March following several disappointing months that failed to show consumers splurging with their hefty savings from low gasoline prices. But retail sales were weak in April as many consumers continued to sock away their windfall. With Americans increasingly convinced cheap fuel will be around for a while, many economists expect stronger purchases in coming months.

Manufacturers, meanwhile, were hit hardest by a flurry of events in recent months. The effects of the harsh weather and a labor dispute at West Coast ports that hampered shipments are fading. But a strong dollar is still making exports more expensive for foreign buyers, and low oil prices continue to force producers to scale back drilling, hurting steel and other makers. Both the dollar and oil prices are stabilizing. But Nomura Chief U.S. Economist Lewis Alexander says the recovery for manufacturers is likely to be slow. Economists expect a small gain in the Institute for Supply Management's manufacturing index for May, reflecting continued expansion but at a modest pace.

Construction spending was also hammered by the adverse weather and pullback in oil projects, with both residential and non-residential outlays falling in March. Economists expect a modest 0.6% bounce-back in April.

Trade has been a bigger drag on the economy. The strong dollar drove the trade deficit to a seven-year high of $51.4 billion in March. But at least part of the imports surge was due to the clearing of shipping backlogs after a labor dispute at West Coast ports was settled in February. Economists expect Commerce on Wednesday to report a narrower gap of $44 billion.

The service sector, which makes up 80% of the economy, has held up better, and economists expect ISM's report on service activity to dip slightly but still record solid growth. That should bolster payroll advances. Economists estimate payroll processor ADP's report on private-sector job growth will post 198,000 new jobs in May, up from 169,000 the previous month.

The ADP report is sometimes a precursor to the Labor Department's closely watched survey of both public and private-sector employment growth, due out Friday. Economists expect a solid 222,000 payroll gains for May, in line with the previous month's rebound from March's disappointing 85,000 advances, which were held down by the nasty weather.