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WASHINGTON (AP) – US hiring went sour in May as employers created only 75,000 jobs, showing companies have become more cautious about weaker global growth, escalating trade disputes and perhaps the difficulty of finding enough workers.
The modest increase in employment recorded last month followed a much healthier increase of 224,000 in April. The Labor Department announced Friday that the unemployment rate remained at 3.6%, its lowest level in nearly 50 years.
Poor employment growth, combined with growing pressure on the economy, makes the Federal Reserve rate cuts more likely in the months to come. Bond yields fell after the publication of the data on employment, indicating expectations of a Fed rate cut. Equity investors also agreed, with the Dow Jones Industrial Average up nearly 300 points in a late session.
On Friday, the government also revised down the economy's hiring gains for March and April by 75,000 in total. In the first five months of the year, employment growth averaged 164,000 per month, a steady pace that is enough to drive down the unemployment rate over time. Nevertheless, it is below the pace of 225,000 last year.
Last month, President Donald Trump announced an increase in tariffs on Chinese imports of $ 200 billion, from 10% to 25%. And last week he threatened to impose a 5% tariff on all Mexican imports to the United States as of Monday. These taxes would increase each month until reaching 25% in October, unless the Mexican government stops a stream of Central American immigrants coming from the United States and entering the United States.
The economy is showing signs of sluggishness as the expansion has reached its tenth anniversary. Next month, it will be the longest period of uninterrupted growth with records dating back to 1854. Yet, consumers have become cautious about spending and companies are reducing their investment in high-cost machinery and equipment.
Economists have warned that employment figures for May only cover a month and that overall trends indicate that hirings remain stable. They also noted, however, that May's weaker hiring data preceded Trump's threat last week of imposing 5% tariffs in Mexico. As a result, the impact of trade conflicts is likely to emerge in the coming months.
"It sounds like a slowing economy, which does not mean we're necessarily going into recession," said Martha Gimbel, director of economic research at the job search site actually. "Coming in the context of tariffs and other economic obstacles makes this figure more worrying."
The economy grew at a steady annual rate of 3.1% in the January-March quarter. The Federal Reserve Bank of Atlanta estimates that annual growth will fall to 1.5% during the quarter from April to June.
The slowdown in hiring could mean that some employers are just struggling to find the workers they need, since the pool of unemployed is relatively small. Yet wages are expected to grow faster than before as employers compete for workers.
Average hourly wages increased only 3.1% in May from the previous year, a slight decrease from the 3.2% gain last month. It was the smallest increase of this type since September. Smaller increases, combined with slower hiring, could reduce consumers' willingness to spend in the coming months.
The hiring was weak in a wide range of industries in May. Manufacturers created only 3,000 jobs, the fourth consecutive month of sluggish growth. Construction companies recruited only 4,000 people, financial services only 2,000.
Employers in several industries are downsizing. Retailers are laying off workers for a fifth consecutive month as online anti-competitive stores. A category that includes telecommunications, publishing and media is eliminating 5,000 jobs. Federal, state and local governments cut 15,000 people.
Software and technology companies remain a positive point. Paul McDonald, chief executive of recruiting firm Robert Half International, said that mobile application developers, data analysts, programmers and senior financial analysts typically receive many offers and substantial salary gains.
"It's still a market for job seekers," he said.
Keeper Security, a cyber security company, announced last month its intention to expand its Chicago headquarters and add 130 new jobs over the next six months to its current 160 or so employees.
CEO Darren Guccione said his company has not had much difficulty finding candidates to fill positions in programming, sales and marketing. The company hires software developers in its Sacramento office and is able to attract employees who are tired of the high cost of living in San Francisco.
"We see a lot of candidates," he said.
Commercial disputes have had no impact on society, added Guccione.
Tariffs have affected manufacturing and retail firms more than software companies and have become a growing threat to the economy.
The higher costs of taxes on imports – and the potential for growth – are driving some companies to cut back on their spending, investment and expansion plans. A strong dollar, which makes US goods more expensive abroad, has also slowed the production and export of manufactured goods. Industrial production fell 0.5% in April, according to a Fed report.
Automakers are cutting jobs and production while sales in the US have declined. Analysts expect auto sales to fall below 17 million this year after four years behind schedule.
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Follow Chris Rugaber on Twitter at http://twitter.com/ChrisRugaber
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