Associated Press (06/05/12) Martin Crutsinger

U.S. service companies grew at a slightly faster pace in May, marking the 29th straight month of expansion. The Institute for Supply Management’s index of nonmanufacturing activity edged up to 53.7 last month from an April reading of 53.5. The May reading was slightly below the long-run average for the index of 53.9. A reading above 50 indicates expansion. Economists said the increase in the new orders component of the index is a good sign that demand will be solid in coming months. They expressed concern, however, that the employment component, while remaining in expansion territory, slipped to the lowest reading since November.

Los Angeles Times (06/06/12) Marc Lifsher

A new report by the National Employment Law Project says wages and benefits for U.S. warehouse workers are on the decline as a result of aggressive cost cutting by Wal-Mart Stores Inc., which has outsourced its supply chain and relies on third-party companies for warehouse operations and transport, which depend on low-wage temporary workers. The report indicates that Wal-Mart’s competitors are now demanding similarly low prices from logistics companies, reducing the quality of warehouse jobs nationwide. According to the report, “Outsourcing and other contingent work models like ‘permatemping’ have become increasingly standard in the industry.”

Wall Street Journal (06/06/12) Nathan Hodge

U.S. defense contractors are preparing to disclose major job cutbacks ahead of the November elections if Congress fails to reach a deficit-reduction deal by then. Firms including Lockheed Martin Corp. and Northrop Grumman Corp. may lay off thousands of workers at the beginning of 2013, when more than $50 billion in new defense cuts could take effect—along with similar reductions across federal agencies.

Defense manufacturers and their suppliers employ around one million workers combined. Defense industry officials say that they will have to notify employees of potential layoffs 60 or 90 days ahead of time, in line with state and federal plant-closing laws. The Worker Adjustment and Retraining and Notification Act requires companies to notify employees in advance of mass layoffs and plant closings.

Bloomberg (06/06/12) Alex Kowalski

The productivity of U.S. workers dropped at the fastest pace in a year in the first quarter, the U.S. Department of Labor reported today, indicating companies may pause before bringing on new employees. Nonfarm productivity decreased at a 0.9% annual pace, faster than the initial estimate of an annual rate of decline of 0.5%. The drop in productivity at the beginning of the year helps explain why payroll gains in May were the weakest in a year. Slower U.S. growth combined with European economies on the verge of recession shows why companies may cut back worker hours and become more deliberate in their hiring.

Bloomberg (06/06/12) Caroline Salas Gage; Jeff Kearns

Chicago Federal Reserve president Charles Evans insists that “extremely strong accommodation” is needed in response to soft economic data and that the U.S. Federal Reserve should state that interest rates will be held down unless the unemployment rate dips under 7% or inflation jumps above 3% during “the medium term.” However, Dallas Federal Reserve president Richard Fisher opposes more bond purchases by the central bank because it would do little to help the economy. Meanwhile, St. Louis Federal Reserve president James Bullard says more time should be taken to assess the economy before moving forward with policy change, noting that the economic outlook has not been altered by the recent payroll data.