US Employers Add Only 75,000 Jobs Amid Heightened Trade Tensions

Daniel Fowler
June 9, 2019

But economists and business leaders have warned that escalating trade tensions threaten to undermine the economy, which is set to mark a record decade of expansion next month.

The US economy only added 75,000 new jobs in May, compared with the consensus expectation for 185,000.

The unemployment data added pressure ahead of the meeting of the Fed on June 18 and 19 after the central bank said it was open to considering a possible drop in the face of concern over the escalation in trade tensions between the USA with China and Mexico.

The dollar and Treasury yields fell as the data signalled the labour market was facing new pressures even before Mr Trump threatened tariffs on Mexican goods, in addition to proposed higher levies on Chinese imports.

Meanwhile, Trump has also announced a 5 percent tariff on imports from Mexico, effective June 10, in an attempt to make the trade partner respond more vigorously to the growing stream of migrants who travel from Central America through Mexico and enter the US illegally.

Talks to prevent the duties from kicking in at 5 per cent on June 10 continue.

The Labor Department says the modest increase follows a healthier gain of 224,000 in April.

Economists predicted 180,000 jobs would be added and that wage growth would rise to about 3.2%, according to The Wall Street Journal. Jobs gains for the previous two months were also revised downward by 75,000.

As the world's largest economy nears its longest expansion next month, the employment report may amplify rhetoric that Fed rate cuts are needed to support growth. It "tripled the price of oil and plunged the USA into what was then its worst recession" in 40 years.

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Stocks jumped as traders focused on the interest-rate implications of the report.

Job growth has come back strong after February, when just 33,000 jobs were added. Another report this week showed a drop in online ads by businesses looking for help.

Employment gains in May slowed across all sectors. "But we are increasingly convinced that the Fed will begin cutting interest rates later this year".

Average hourly earnings grew just 3.1 per cent year-over-year, the slowest annual increase since September.

The moderation in wage gains, if sustained could cast doubts on the Fed's optimism that inflation would return to the USA central bank's 2 per cent target.

The Atlanta Fed is forecasting gross domestic product rising at a 1.4 per cent annualised rate in the second quarter. The Labor Department said Friday that the unemployment rate remained at a almost 50-year low of 3.6%. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they can not find full-time employment, dropped two-tenths of a percentage point to 7.1 per cent last month, the lowest since December 2000.

The participation rate, or share of working-age people in the labor force, held at 62.8%.

Some of the weakness in hiring could be because of worker shortages, especially in the construction, transportation and manufacturing sectors. Carrying out the latest round of threats against China alone would increase that to $831.

US House of Representative Speaker Nancy Pelosi, a Democrat, said the employment report was 'a disturbing sign that the administration's disastrous special interest agenda is hollowing out our economy'.

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