The economy is starting to look a bit fragile

The national unemployment rate is still at 3.6%, its lowest level since 1969, but the jobs report released Friday by the US Department of Labor showed signs of weakness in the US economy then that the race for the presidency gets under way.

The economy created only 75,000 jobs in May, bringing average employment growth to 151,000 over the last three months, up from 216,000 last year. And while workers' wages continued to grow, the pace slowed, rising to a rate of 3.1% after a peak of 3.4% in February.

Most economists believe that a low unemployment rate puts upward pressure on wages: with fewer desperate workers willing to take up low-paying jobs, companies are forced to offer higher wages to attract and retain talent.

"Although the slowdown in job growth announced in May is discouraging, the most disconcerting aspect of this report is evidence that wage growth is slowing despite the unemployment rate of 3.6 percent." %, "Said Dean Baker of the Center for Policy and Policy Research. in his review of the data.

The numbers gave rise to an unusually bleak statement from Rep. Kevin Brady (R-Texas), the Republican of the House Tax Committee.

"These numbers are less than hoped but not surprising given the uncertainty surrounding global trade tensions and the dysfunctional Congress led by democrats obsessed with investigations, dismissal and tax hikes rather than by labor. with the Republicans to solve the problems of the United States, "said Brady.

Predictions of economic loss have followed all major economic policy decisions of President Donald Trump, his tax cuts for bankers and brokers primarily for his chaotic tariff program. But while none of Trump's key economic initiatives has done much for workers, it has not sufficiently disrupted the economy to make growth unbalanced. In 2017, most economists considered that the US economy was at full employment, which meant that it could not create more jobs without fueling inflation. Instead, millions of jobs were created without substantial price increases.

But the economy will not continue to fly on its own forever. Starting this month, the recovery from the Great Recession, which ended in June 2009, is tied for the longest on the record. Some economists fear a gasoline outage over the next year.

What will happen next could belong to the Federal Reserve.

The Fed regulates overall employment and inflation in the US economy by adjusting interest rates, that is, the price of loans to consumers and consumers. companies. Rising rates typically slow the economy by forcing consumers and businesses to borrow money and spend money to grow the economy. By reducing borrowing costs, reducing rates can contribute to the growth of the economy. But growth can also fuel inflation because higher wages increase the purchasing power of workers.

Since the 2008 financial crisis, the Fed has maintained relatively low rates, including a nine-year period in which rates were actually zero. But since the beginning of 2016, central bank officials were eager to raise interest rates, in part because they are just used to using credit cards. higher interest rates and partly because many wish to be able to reduce their rates if the economy slows down. down. As job and wage growth slows, many economists hope the Fed will cut rates at its next meeting in June.

The political stakes are high. The strength of the economy has been one of Trump's favorite topics throughout his presidency. According to conventional wisdom in Washington, voters are more likely to ignore Trump's scandals and continued abuses of power as long as the economy is doing well.

"You can not dismiss a president for creating the best economy in the history of our country," Trump said. tweeted last month.

All he needs is a little help from the Fed. To that end, the president has shown he will use intimidation to get the kind of monetary policy he wants.

"The only problem in our economy is the Fed," he said. tweeted in december during a stock market faint. "They have no idea of ​​the market, they do not understand trade wars, strong dollars, or even democratic closures across borders. The Fed is like a powerful golfer who can not score because he has no contact – he can not do putt! "

Since the late 1970s, the Fed has adhered to a policy of strict "independence" from the executive. Economic policy-making is much easier when the central bank coordinates its activities with Congress and the administration, as was the case for much of the twentieth century. But a large part of the economic and legal professions have come to believe that economic management should not be subject to the pressures and short-term passions of the president who watched for the next election.

As a result, many Fed members want to assert their independence from Trump by opposing its repeated demand for low interest rates. Trump pulled himself in the foot by replacing Fed President Janet Yellen – a low-rate Obama nominee – by Jerome Powell, a Republican who said he wanted to raise rates before it was confirmed. But Powell also does not want to provoke a recession by being excessively stingy.

In remarks this weekMr Powell said he was attentive to unstable trade negotiations and economic data. "We are closely watching the implications of these developments for the US economic outlook and, as always, we will act appropriately to support the expansion," he said.