Strong growth in US employment expected in May, trade tensions threaten

WASHINGTON (Reuters) – Employment growth in the United States is likely to rise sharply in May. Wage gains should accelerate. The labor market should strengthen before an escalation of trade tensions, announced by analysts, can put pressure on an already sluggish economy.

While the drums of the trade war are beating very hard in the background, a Labor Department employment report released on Friday will likely do nothing to thwart market expectations of lower rates of pay. interest by the Federal Reserve this year. Fed Chairman Jerome Powell said on Tuesday that the central bank was closely following the implications of trade tensions on the economy and that it would "act appropriately to support the expansion."

In early May, President Donald Trump imposed additional duties of up to 25% on Chinese goods worth $ 200 billion, prompting Beijing to take retaliatory measures. Last week, Trump announced it would impose a tariff on all goods from Mexico to contain the wave of migrants across the US-Mexico border.

Talks are underway to prevent tariffs from entering into force at 5% on June 10.

Non-farm payrolls likely increased 185,000 jobs last month, following a 263,000 increase in April, according to a Reuters survey by economists. That would be well above the 100,000 needed per month to keep pace with the growth of the working-age population.

"Trade wars in which the United States finds itself trapped will slow down hirings, the business climate will weaken, capital expenditures to improve productivity will decrease, and the damage will affect the consumer sector," he said. said Joseph Brusuelas, chief economist at RSM US in New York.

The payroll of the manufacturing sector will be closely monitored to detect signs of the impact of tariffs on the economy. Factory production was weak and the climate dropped to its lowest level in 31 months in May, with manufacturers worrying mainly about trade tensions.

But May's job growth may be disappointing after a report released Wednesday by payroll firm ADP recorded the smallest increase in private payroll in nine years last month. Another report released this week showed a decline in the number of online ads companies looking for help.

The ADP report, however, is unlikely to predict the private component of the payroll in the government's employment report due to differences in methodology. Other labor market measures, such as the weekly claims for unemployment benefits and the Institute for Supply Management's employment tonnage, suggest strong job gains in May.

SOME SALARY INFLATIONS

Monthly wage growth is expected to have increased in May, with average hourly earnings rising 0.3% after rising 0.2% in April. Wages are expected to increase 3.2% in the 12 months to May. Workers are also likely to make more hours last month.

While steady wage growth reinforced the Fed's optimism about the return of inflation to the US central bank's 2% target, economists said it was likely to defeat the created uncertainty. by trade tensions.

"With the current trade dispute at the center of concerns, a fear that the deterioration of household and business confidence will lead people to close their portfolios could give the Fed additional reason to preemptively cut rates," he said. said Beth Ann Bovino, chief US economist at S & P Global. Assessments.

Financial markets expect two rate cuts this year. Despite the slowdown in employment growth due to the scarcity of workers, the strength of the labor market should support the economy. Growth is slowing as stimulus measures imposed by last year's tax cuts and rising spending fade.

The Atlanta Fed forecasts gross domestic product up 1.5% on an annualized basis in the second quarter. The economy grew at a rate of 3.1% in the first quarter.

The unemployment rate should have remained close to its lowest level in 50 years, or 3.6% in May. The unemployment rate was partially reduced by the number of workers who left the labor force in the last four months. We expect a rebound in the rate of labor market activity or the proportion of Americans of working age who are looking for or looking for a job.

Employment probably increased in all sectors in May, but its pace has probably slowed compared to April.

The manufacturing wage bill is expected to have risen by 5,000 last month, but the auto industry has likely lost more jobs as assembly plants reduced production of some models to cope with the decline sales and overpopulation of stocks.

Another month of job creation is expected in the construction sector following the recruitment by employers of 33,000 workers in April. Government staffing is expected to increase by at least 10,000 jobs in May, but recruitment for the 2020 census is a joker for the estimate.