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Employment growth in the United States slowed sharply in May and wages rose less than expected, raising fears of a slowdown in economic activity in the labor market, which could spur the economy. Federal Reserve to reduce its interest rates this year.
The general slowdown in hiring announced by the Ministry of Labor on Friday had occurred before the recent escalation of trade tensions between the United States and two of its major trading partners, China and Mexico. Analysts have warned that trade disputes could undermine the economy, which will celebrate its 10-year expansion next month, the longest in its history.
Adding something to the closely monitored employment report, the number of jobs created in March and April is significantly lower than previously reported, indicating that hiring has moved to a lower level. Until now, the labor market has largely withstood the trade war with China.
"The report released today makes a reduction more likely and supports our view that trade tensions will slow growth enough for the Fed to react in September and December with cuts," said Joseph Song. Economist at Bank of America Merrill Lynch in New York. .
The non-farm payroll increased by 75,000 jobs last month, the government said. This is the second time this year that job gains have gone under the 100,000 mark. Economists polled by Reuters were predicting an increase of 185,000 jobs in the month of March. Employment growth in March and April was revised downward by 75,000.
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 that it would impose a tariff on all goods from Mexico in order to force the authorities of that country to prevent immigrants from Central America from crossing the US border. United.
Talks to prevent the implementation of the 5% tariff on June 10 continue. Fed Chairman Jerome Powell said on Tuesday that the US central bank is closely monitoring the implications of trade tensions on the economy and that it "would act appropriately to support the expansion. "
Trump, who regularly tweeted about the strength of the job market, made no comment on May's weak hiring, but defended rights over Chinese products. White House economic advisor Kevin Hassett told Fox Business Network that bad weather in the Midwest was to blame and described the meager job gains as "a dramatic twist".
Economists, however, said there was nothing to suggest that climate was the cause.
"Weak employment growth has been widespread in all sectors of the industry and has not been caused by distortions such as weather or strikes," said Michael Feroli, economist at JPMorgan in New York. York.
Democrat Democrat Nancy Pelosi, Speaker of the US House of Representatives, said the jobs report was "a worrying sign that the disastrous agenda of the administration's special interest is clouding our economy."
Following the report, the financial markets are planning a rate cut in July and two more later this year. Economists believe, however, that the Fed will likely wait for more signs of weaker labor markets and clarity on trade issues before easing monetary policy. Fed representatives are due to meet on June 18-19.
"Fed officials will likely remain cautious at the June meeting and retain all their options," said Michael Hanson, Head of Global Macro Strategy at TD Securities in New York.
The dollar fell to its lowest level in two and a half months compared to a basket of currencies, while US Treasury prices rose. Wall Street shares were trading higher.
Shortages of workers
However, the slowdown in job gains underestimated last month has probably underestimated the health of the labor market, with layoffs still weak.
Employment gains over the past three months averaged 151,000, more than the roughly 100,000 needed per month to keep pace with the growth of the working-age population. However, in the four months following the first recruitment problems in February, monthly employment gains rose by an average of only 127,000, the slowest pace of almost seven years.
One of the weaknesses of hiring could come from labor shortages, particularly in the construction, transportation and manufacturing sectors. But the labor shortage argument is somewhat compromised by moderate wage growth.
Average hourly earnings increased only 3.1% year-over-year, the smallest annual increase since September. Just three months ago, wages had risen at their fastest pace in a decade, but earnings have moderated since.
The lukewarm employment report added to weak data on consumer spending, business investment, manufacturing and home sales, suggesting the economy was slowing in the second quarter following a temporary stimulus exports, stock-building and defense spending. Growth is slowing as stimulus measures imposed by last year's tax cuts and rising spending fade.
The Atlanta Fed projects gross domestic product up 1.4% on an annualized basis in the second quarter. The economy grew at a rate of 3.1% in the first quarter.
The unemployment rate remained close to a 50-year low of 3.6% in May. A broader measure of unemployment, which includes people who want to work but have stopped looking and those who work part-time because they can not find a full-time job, dropped to 7.1% on the month last, its lowest level since December 2000.
Hiring slowed in all sectors in May, with the share of industries posting employment gains during the month being the lowest since July 2016.
The payroll in the manufacturing sector rose by 3,000 last month, after winning 5,000 jobs in April. The sector is struggling with a surplus of stocks that has led companies to place fewer orders in factories.
Construction employers hired 4,000 workers in May after adding 30,000 payroll jobs in April. Employment in professional and business services increased by 33,000. Payroll for transportation and warehousing declined, as did employment in retail trade. The government cut 15,000 jobs, the largest number in 16 months.
(Report by Lucia Mutikani, edited by Andrea Ricci)
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