US added only 75,000 jobs in May as economy shows signs of slowing
Growth in the US employment market decelerated sharply in May, as the economy added just 75,000 jobs – holding the unemployment rate steady at 3.6%, matching its lowest level since 1969.
The job creation numbers came in around 100,000 below expectations, signaling that despite marking the 104th straight month of gains, employers are pulling back as they review the effect of slowing global growth and trade tensions with China, the EU and Mexico.
Coupled with downward revisions for jobs growth in March and April, as well as other signs that the US economy is cooling from a previously more rapid pace of growth, analysts and market watchers are growing more confident that the federal reserve could soon begin to drop benchmark interest rates.
“Along with the downward revisions to previous months, it is another sign that economic growth is slowing,” according to a note posted by Andrew Hunter, senior US economist at Capital Economics.
Hunter predicted that while policymakers will want to see evidence of more sustained weakness before taking action, “we are increasingly convinced that the Fed will begin cutting interest rates later this year”.
Investors welcomed the prospect of lower borrowing rates, sending the Dow Jones and other stock market indices higher for a fourth day. By midafternoon, the Dow had surged 299.34 points, or 1.16%, to 26,020. The bluechip index has recovered more than 1,000 points this week.
The surge was noted by Donald Trump, who tweeted late on Friday: “Dow Jones has best week of the year!”
Still, the US economy is sending
mixed signals. Consumers are spending confidently even as the housing market softens and manufacturing output falls. A weakening global economy, coupled with the effects of Donald Trump’s aggressive trade policies have added to the uncertainty.
Until recently, the Fed had signaled it planned to continue raising its benchmark interest rate, a program its started in late 2016. But on Tuesday, the central bank’s chairman, Jerome Powell, hinted that policymakers were prepared to cut rates if the trade war hurt the economy.
If economic indicators continue to show signs of a slowdown, an interest rate cut could come as soon as 18 or 19 June, when the board of governors next meets. But that could be seen as bowing to both the financial markets and Trump’s demand that it cease raising interest rates.
The White House has acknowledged that despite weak approval ratings for much of Trump’s political agenda – and in the absence of a foreign war – a strong economy is vital to the president’s re-election prospects in 2020. Speaking to ITV this week, Trump pinned his re-election chances on two factors: the absence of a stronger democratic challenger and the strength of the economy.
“There’s nobody that I see that should be able to win,” he said. “Look, I’m running on the best economy in our history.”
The latest jobs figures may not be entirely negative for the US labour market. According to Irina Novoselsky, CEO of CareerBuilder, the low unemployment figures mean it’s a job seekers’ market.
“While we’ve seen a slowdown in hiring, prospects remain positive for job seekers, regardless of someone’s resumé or background: 59% of employers are willing to hire candidates who may not be fully qualified, with plans to train them on the job, and a growing number of hiring managers are no longer looking at college degrees as indicators of whether or not to hire a candidate.”