A slowdown of the US hiring markets has been noticed in a job report which was published on Friday, and is predicted to become worse with Trump’s escalation of the trade war. All economic estimates and steep downward revisions have been missed by the payroll figures of May, and this has translated into a four month average job gain of 127,000. This has been the slowest since 2012, and has compared with the average seen in the first two years of Trump’s presidential tenure which was 201,000.
Strains have come to light beyond just goods producing industries which typically are on the trade frontlines. A measure of job-creation has fallen to a two year low and extremely limited gains have emerged for service providers, and weakness has been noticed in the healthcare and retail sectors. Manufacturing sector has made an addition of 3,000 jobs in the last four months, which is the lowest since Trump’s election, and promise to revive the American factories.
This report has included the slowest gain in wage since September and suggests that the trade disputes are hitting labour markets and will continue to do so if Trump follows through on his threats of trade tariffs against China and Mexico. Bets have increased by investors that Federal Reserve is due to make cuts in the interest rates owing to the fallout.
Michelle Meyer, the head of US economics at the Bank of America Corp. has been quoted saying that this heightened degree of uncertainty when it comes to the trade war has made employers more cautious and hold back on hiring until more clarity is arrived at. The concern here is whether the impact will rise and cause more shocks.
The slowdown causes concerns with regards to slow growth in the US and abroad, and is giving companies more reasons to pull back according to the senior economist at Wells Fargo and Co., Sam Bullard.
Economists View of the Situation:
According to Bullard, the Labour Department did not mention special weather impacts, but the flooding of lowered hiring numbers have followed an outsize bump in construction jobs in April. This slowdown means that people will have lesser money in their pockets and will translate into lower consumer spending growth,
US stocks have seen a rise on Friday as expectations rise that the Fed will boost growth in line with Chair Jerome Powell’s statement that the central bank will act to sustain the expansion. The Fed watchers have said that no interest rate cuts will take place before July.
According to Meyer, markets should watch for a sustained downtrend in indicators such as the Institute of Supply Management’s non-manufacturing survey, and payrolls.
