Due to the credit crunch and the weakening U.S. economy, more and more people are applying for unemployment benefits.

In a press release the federal government has revealed that the enterprises show sluggish hiring as the economy gets weaker.

The report says that higher oil prices, stagnant wages and a depressed housing market are pulling the economy in a backward direction. The factors holding back the economy, such as the disruptions to manufacturing output stemming from Japan's March 11 earthquake are temporary.

 Economists expect that companies likely hired far fewer people in May than the previous three months. 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.

The question raised by a sluggish report: is it temporary, or the beginning of a weaker trend? If there are fewer jobs, that could cut consumer spending, threatening overall growth for the rest of this year, Goldman Sachs economist Jan Hatzius wrote in a note to clients Wednesday.

According to a survey by FactSet (News - Alert), the unemployment rate is likely to dip to 8.9 percent from 9 percent the previous month, economists expect.

"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."

 Nariman Behravesh, chief economist for IHS (News - Alert), thinks the economy will pick up once gas prices decline further and Congress and the White House resolve their conflict over the debt ceiling. 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.

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.