Hiring cooled in May, the Labor Department reported Friday, as firms appeared more hesitant to bring on new employees amid the uncertainty and concern over President Trump escalating the trade war with China.

The U.S. economy added 75,000 jobs in May, a significant pullback from 224,000 jobs added in April that is likely to heighten fears that the trade war is taking a greater toll. The unemployment rate remained at a five decade low of 3.6 percent.

Manufacturing and construction saw anemic job growth in May with less than 5,000 jobs added in each sector, one of the clearest signs that Trump’s tariffs are having a negative impact on blue-collar sectors the president has been trying to boost.

“The slowdown is really coming from the sectors that are most susceptible to trade tensions like manufacturing, construction, mining and logging. That does make me worried,” said Martha Gimbel, research director for Indeed.com’s Hiring Lab.

Calls are growing for the Federal Reserve to reduce interest rates to counter Trump’s trade moves. Wall Street now sees more than a 75 percent probability the Fed will cut rates by the end of July. Despite the disappointing hiring, stocks rallied on Friday with the Dow Jones Industrial Average jumping more than 200 points as investors believe the Fed will act soon.

“These data make it easier for the Fed to ease either this month or next,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

But the bond market is telling a far more pessimistic story as investors brace for a more severe downturn. Experts are struggling to figure out how much the economy is cooling and how concerned to be about it.

Kevin Hassett, Trump’s chief economist, called the May jobs report a little below expectations but said much of the slowdown in hiring in construction can be explained by the torrential rains and flooding that pounded parts of the country.

“We think half the story is weather,” Hassett said. “Manufacturing did slow over the last few months…but attributing that to trade right now is tricky because Mexico just started and the China did only hit a roadblock in May.”

Hassett is still predicting growth will be about 3 percent this year and that markets and the economy are likely to bounce once the trade deals are made.

“The economy has been much stronger than markets expected time after time,” Hassett said, although he acknowledge Trump “has a lot to weigh” over whether to move ahead with tariffs on Mexico.

There was widespread expectation among economists that growth and hiring would slow this year after such a strong 2018 that was boosted by the tax cuts and additional government spending. The U.S. economy has also been expanding for 10 years now, a new record, and companies typically run out of people to hire at this stage of the business cycle so some of the waning employment growth was anticipated.

But business leaders are growing increasingly alarmed at Trump’s seemingly unending appetite for tariffs, making it hard to ignore that the trade war is also playing a role.

Auto companies like Ford and GM have repeatedly warned the president that his tariffs on America’s neighbors and on metals are harming the industry and costing billions a year. The president removed metals tariffs on Canada and Mexico in May but is now threatening import duties on all goods coming across the Mexican border, an even more severe and costly move.

“This looks like an economy that is slowing down, which doesn’t mean that we’re necessarily entering a recession. It does mean that we likely will not have the strength that we had in past years,” said Gimbel.

May marked the 104th straight month of job gains for the nation, a record streak that has helped many Americans including those with disabilities or criminal histories to find jobs. Many business leaders say finding workers is their top struggle, but they are not raising wages as fast as they were earlier this year.

The average hourly wage grew 3.1 percent in the past year, above the cost of living but well below the 4 percent growth experienced during the economic boom of the late 1990s.

Workers and economists had hoped to see stronger wage gains this summer as unemployment remained low but wage gains appear to be stalling. Annual wage growth hit 3.4 percent in December but has since pulled back slightly, raising concerns that this might be as good as it gets for workers this time around.

Job experts advise workers to ask for raises or look to change jobs soon before the economy shows more signs of weakening.

“The weaker-than-expected May employment report serves as a reminder that the sun doesn’t shine on the economy forever,” said Mark Hamrick, senior economic analyst at Bankrate. “It underscores the need to save for emergencies and to pay down debt in preparation for the inevitable economic downturn or turbulence.”

The Labor Department conducted the May jobs surveys before Trump threatened to place tariffs on all imports coming from Mexico to the United States. Mexican officials have been at the White House this week trying to negotiate a deal to stem the tide of immigrants crossing the U.S.-Mexican border.

While all indicators are that the talks have been going well, Trump and other top officials continue to indicate that a 5 percent tariff is likely starting on Monday.

“Our position hasn’t changed,” said White House spokeswoman Sarah Sanders. “Tariffs are going to take effect on Monday.”

The tax is expected to cost every American an additional $50 a year and that could escalate if the tariff rate goes higher.

Economists are warning that the ramification for jobs could be severe with potentially hundreds of thousands of jobs at risk, especially in the auto and manufacturing sectors that have supply chains that often cross the border.

Related:

The fate of Trump’s economy now hinges on the Federal Reserve, the agency the president called ‘crazy’

Trump probably has the upper hand in trade war — until September

As Walmart turns to robots, it’s the human workers who feel like machines

Source link

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *