Weak US employment report raises red flag on economy

Weak US employment report raises red flag on economy

But the U.S. Labor Department showed the economy is creating far fewer jobs last month than experts forecast, adding the latest piece to a string of disappointing reports that shows a 10-year boom gasping - for an interest-rate cut. Alluding to the Trump administration's ongoing trade dispute with China and the imminent imposition of migration-related tariffs on Mexico, Powell said that the Fed "will act as appropriate to sustain the expansion".

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

On the positive side, Duncan said, the unemployment rate remains at a historically low level and average hourly wages rose by 3.1 percent year over year to $27.83. "With only 75,000 new jobs in May, this is a major slowdown from 2017, 2018 and the first four months of 2019". Jobs gains for the previous two months were also revised downward by 75,000.

In the wake of the weak report financial markets priced in a rate cut as early as July and two more later this year. Growth is cooling as the massive stimulus from last year's tax cuts and spending increases fades. Next month, it will become the longest period of uninterrupted growth on records dating to 1854.

The economy expanded at a healthy 3.1% annual rate in the January-March quarter, but the Federal Reserve Bank of Atlanta estimates that annual growth will slump to just 1.5% in the April-June quarter. Wages rose by an average of 3.1 percent compared with a year earlier. Manufacturing payrolls increased by 3,000 last month, after gaining 5,000 positions in April. The construction industry added 4,000 jobs. Retailers shed workers for the fifth straight month as stores struggle with online competition. Federal, state and local governments cut a combined 15,000.

Because of the trade wars, Iran sanctions, presidential tweets and geopolitics, "businesses don't know what the future holds", DePalma said. Trump has now "enacted or threatened what amounts to a almost $200 billion annual tax increase on American businesses and consumers".

Last week, Trump said he would impose a tariff on all goods from Mexico in a bid to force authorities in that country to stop immigrants from Central America from crossing the border into the United States.

More news: European Central Bank pushes back rate hike again as outlook darkens

The higher costs from the import taxes - and the potential for more - are causing some companies to scale back plans for spending, investment and expansion. Orders for machinery and equipment fell 1% in April. With cheap foreign components costing more or becoming unavailable, manufacturing activity in the slowing - with some business owners "citing rising concerns over the cost and uncertainty brought on by tariffs".

Automakers are cutting jobs and production as U.S. sales have slowed.

"We think that their hopes are misplaced, which is the key reason we expect the S&P 500 to fall sharply before the year is out", he said in a note on Friday.

Some of the weakness in hiring last month could be the result of worker shortages, especially in the construction, transportation and manufacturing sectors.

Fratantoni added that the outlook for home sales and mortgage activity this summer remains brighter than previous year, however, given that mortgage rates have fallen recently.

In April, payrolls grew by a robust 263,000 while retail sales and manufacturing sent mixed signals.