United States job increases lower than expected in May

Ann Santiago
June 11, 2019

Experts said the Federal Reserve may seriously consider cutting interest rates if the job numbers don't meet expectations, and Friday's sluggish figures were far short. But the number was also above the 27,000 jobs estimated by the ADP National Employment Report.

The dollar and Treasury yields fell as the data signaled the labor market - a pillar of strength for an economy headed for a record expansion - was facing new pressures even before Trump threatened tariffs on Mexican goods in addition to proposed higher levies on Chinese imports.

USA employers added only 75,000 net new positions last month, less than half the 180,000 economists had been expecting, with sudden drops in hiring in healthcare, education and construction.

That may happen as soon as this month, when the Fed's interest rate-setting panel, the Federal Open Market Committee, convenes its next meeting June 18-19.

Manufacturing has been a soft spot in recent months, with just 4,000 factory jobs added in April and none the month before. Job gains for March and April were also revised downwards by a total of 75,000. It noted that unemployment remains at a historically-low 3.6 percent, or just under 6 million Americans. On the bright side, the US unemployment rate was only at 3.6%.

The labor force participation rate was unchanged in May after falling in both March and April.

Fed chairman Jerome Powell acknowledged on Tuesday that the central financial institution used to be carefully monitoring the implications of the change tensions on the financial system and would "act as applicable to shield [economic] expansion". Chief US economist Tom Porcelli at RBC Capital Markets in NY said: "This number is just going to feed the narrative of the Fed imminently cutting rates".

Cardillo said trade tensions may have made companies more hesitant to hire.

Another month of job gains is expected in the construction sector after employers hired 33,000 workers in April.

The U.S. government under Trump has levied a 25% tariffs on Chinese imports, throwing global trade a curveball.

Meanwhile, Mexico has prepared a list of possible retaliatory tariffs targeting US products from agricultural and industrial states regarded as Trump's electoral base, a tactic the Chinese regime has also used with an eye toward the Republican president's 2020 re-election bid.

Retail jobs fell by 7,600 for a fourth-straight drop while transportation and warehousing and nondurable goods also slipped.

TIM QUINLAN: There's increasing evidence that the ongoing trade war here is beginning to have some tangible effects on the US economy.

How did the stock market react?

Still, it's below last year's pace. The unemployment rate is expected to remain at a almost 50-year low of 3.6%, according to data provider FactSet. Yet wages should be rising faster than they are as employers compete for workers.

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