U.S. job growth slowing, firms await reforms
U.S. employers added fewer than 140,000 jobs last month as companies struggle to find workers to fill positions and appear to be keeping their foot off the gas until the outlook for Washington, D.C., policy changes like corporate tax reform become more clear.
“Today’s jobs number is disappointing, but the overall trend is still very positive and the unemployment rate continues to decline,” said Tony Bedikian, managing director of global markets at Citizens Bank. “The U.S. economy is showing other signs of strength as well.”
The Department of Labor announced yesterday that the economy added 138,000 jobs last month, while April and March job numbers were revised down by a combined 66,000 jobs. Over the past three months, employers have added an average of 121,000 jobs each month, compared to an average of 201,000 jobs per month in the three months prior. Over the past year, employers have added an average of 181,000 jobs per month.
In May, the unemployment rate fell to 4.3 percent, the lowest it has been since 2001. Still, the rate fell in part because some unemployed people stopped looking for work and are no longer considered unemployed. Even with the economy at or near full employment, wages have increased slowly, rising just 2.5 percent over the past year. Economists say that suggests there are still those who are being left out.
“Those employed part-time for economic reasons remains higher than has been the case in previous expansions,” economists at Wells Fargo wrote in a research note.
Firms may also be holding off on investments and adding new employees while the fate of proposed policy changes in D.C. remain up in the air.
“Companies may be taking a more cautious approach to hiring,” said Nariman Behravesh, chief economist at IHS Markit. “Not because they are worried about sales, but because they are trying to assess whether the president and Congress will be successful in passing pro-growth policies.”
The White House has sent conflicting messages on plans to introduce sweeping corporate tax reform in recent weeks, with some officials saying a bill is imminent while others say even introducing a bill could take time.
Congress is already trying to pass comprehensive health care reform, with the Senate expected to write its own bill.
Still, the middling job growth will likely still be enough to prompt the Federal Reserve to raise interest rates when the Board of Governors meets later this month.