The May jobs report from the Labor Department was a disappointment across a number of measures:
- Employers added 75,000 jobs, about 100,000 below the consensus estimate.
- Job creation for March and April was revised down by 75,000.
- For the past three months, monthly job gains have averaged 151,000 per month.
- So far in 2019, monthly job gains have averaged 164,000 per month. The average for all of 2018 was 223,000 per month.
- Unemployment held steady at 3.6%. That’s good news.
- The pace of wage gains weakened in May: up 0.2% month to month and up 3.1% year on year — a 0.1% decline from April on both a monthly and annual basis.
- Job gains were subdued across the board: Business services, education, and leisure were all up about by around 30,000.
- Manufacturing essentially flat-lined (up 3,000), continuing the softening trend seen all year, driven by the slowing global economy and trade wars.
- Construction growth was also weak, adding 4,000 jobs.
- Service sector employment was mediocre, with trade, transport and finance essentially unchanged and retail down 8,000 (and down 51,000 over the past four months).
So is the recovery over?
It is certainly premature to declare the 10-year economic expansion has run its course. But the broad-based multimonth slowdown in the labor market is a sign that the strength we’ve seen — especially in the past year, juiced by the Trump tax cuts — is waning.
It’s hard to draw a direct cause-and-effect line between tariff increases and threats of more to come, and the slowdown in the job market and other parts of the economy that we’ve seen recently. There are other important factors at play, such as the fading of tax-cut-driven fiscal stimulus that juiced economic growth, consumer spending and employment growth in 2018.
But it’s pretty clear from survey data and interviews with business leaders and private-sector economists that some of the pullback in employment over the past several months is due to fear and uncertainty about U.S. trade policy. And there has been measurable weakness in goods-producing business activity (i.e., orders) and employment. It’s what economist Joseph Brusuelas at RSM calls an “uncertainty tax” on businesses.
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