There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by just 75K payrolls in May, the smallest gain since February and much worse than anticipated. There was also a net downward revision of 75K jobs to the April and March reports, which resulted in a 3-month average pace of job creation of 151K. That is actually an improvement from April and more than enough to keep up with U.S. population growth. Further, May’s relatively small payrolls gain was still the 104th consecutive month of net job growth in America.
A softer pace of hiring is to be expected as the labor market continues to tighten and the rate of economic growth in this record-length expansion moderates. However, May’s sharp slowdown in job creation suggests that the uncertainty being foisted onto the economy by an escalating trade war is starting to cause more businesses to curtail hiring plans. Other labor market indicators, though, remain at historically strong levels that indicate employers are reluctant to let workers go in the face of widespread talent shortages. For example, the number of Americans making first-time claims for unemployment benefits drifted lower in May and is currently near the lowest level in half a century. Similarly, the national rates of joblessness and underemployment ended last month at the best levels of the current business cycle, suggesting that most Americans who want to find work can find work. Wage gains last month did disappoint forecasts but only slightly and the annual pace of growth is still near the high-end of the expansion’s range. Altogether, the labor market remains a bright spot in the economy that is doing a lot better than the dismal headline payrolls print would suggest. The recent trade-exacerbated weakness, though, should be enough to get the attention of the Federal Reserve and result in some significant revisions later this month to officials’ projections for interest rate adjustments in the year ahead.
Sources: Econoday, U.S. DoL, FRBSL
Post author: Charles Couch