New U.S. hires moderated significantly to just 75,000 in May and figures for the prior two months were downwardly revised, fueling greater speculation the Federal Reserve will have to cut interest rates this year. Conway G. Gittens reports.
Hiring managers hit the brakes in May and that sharp slowdown in hiring is fueling fears of an economic slowdown.
The report released by the Labor Department on Friday came in way below expectations at just 75,000 jobs created last month- a steep falloff from March and April. To make matters worse: hiring for the previous two months was softer than the Labor Department first announced.
The unemployment rate held steady at 3.6 per cent.
I'm Conway Gittens in New York. Ahead of the number there was already a steady drumbeat of economists predicting the Federal Reserve's next rate move would be a rate cut, now after these weak numbers those calling for lower rates are doing so with more conviction. Financial markets have raised expectations to number of rate cuts this year to three, up from two, and bets are up the first one could come as early as next month's meeting.
So where were the weak spots in hiring? There was a slowdown across the board, but transportation and warehousing and government hiring swung from a net positive to a net negative during the month of May. And construction hiring slowed dramatically during a month when it should have picked up along with warmer weather. Manufacturing also had another month of subdued employment gains.
Without the push to hire many new workers, employers weren't forced to dish out many raises. Average hourly earnings rose just six cents last month, following a similar gain in April.
Some economic watchers worry a trade war between the U.S. and China, the world's two biggest economies, is putting pressure on the economy here at home, and now trade tensions have been ratcheted up with Mexico, another major American trading partner.