U.S. hiring slowed in May as employers added just 75,000 jobs, a sign that businesses may have become more cautious in the face of slowing global growth and widening trade conflicts.
The tepid job growth, along with the rising pressures on the economy, make it likelier that the Federal Reserve will cut rates in the coming months.
Last month’s modest job growth followed a much healthier gain of 224,000 in April. The unemployment rate remained at a nearly 50-year low of 3.6% in May. The job gains last month were the fewest since February.
In the first five months of this year, hiring has averaged 164,000 a month, a solid pace that is enough to lower the unemployment rate over time. Still, it’s below last year’s pace of 225,000.
In May, wages rose 3.1% from a year earlier, down slightly from last month’s gain of 3.2%.
The economy is showing signs of sluggishness after having expanded at a healthy 3.1% annual rate in the April-June quarter. Consumers have been cautious about spending, and companies are scaling back their investment in high-cost machinery and equipment.
The Federal Reserve Bank of Atlanta estimates that annual growth will slump to just 1.5% in the April-June quarter.
Manufacturers have barely added jobs in the past three months after healthy gains last year, a sign that trade conflicts and a slowdown in auto sales might be slowing hiring. Retailers, hammered by online competition, have cut jobs for the past three months.
Trump’s trade wars have become a growing threat. Last month, he increased tariffs on $200 billion in Chinese imports from 10% to 25%. And last week, he threatened to impose 5% tariffs on all Mexican imports to the United States beginning Monday. Those taxes would rise each month until they reach 25% in October unless the Mexican government cuts off a flow of Central American migrants entering the United States from through Mexico.
The higher costs from the import taxes – and the potential for more – might be causing companies to scale back plans for spending, investment and expansion. Orders for machinery and equipment fell 1% in April. A strong dollar, which makes U.S. goods costlier overseas, has also slowed the production and export of manufactured goods. A separate report from the Fed showed that factory output fell 0.5% in April.
Automakers are cutting jobs and production as U.S. sales have slowed. Analysts expect auto sales to fall below 17 million this year after four years above that level.
Ford Motor Co. said last month that it was cutting 7,000 white-collar jobs – about 10% of its salaried workforce – as part of preparations for an industry driven more by electric and autonomous vehicles. Last year, GM said it would shed 14,000 workers.
Home sales have been weak this year despite a sharp drop in mortgage rates. Sales fell 4.4% in April compared with a year earlier. Price increases are slowing in much of the country, though, which, combined with more affordable mortgages, could soon revive sales.
Residential and commercial construction has weakened, a trend that could force builders to shed workers.
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