U.S. job growth to Increase in May, trade tensions a threat

Vastavam web: U.S. job growth likely increased solidly in May, with wage gains expected to pick up, showing strength in the labor market before an escalation in trade tensions that analysts have cautioned could pressure an already slowing economy.

With the trade war drums beating loudly in the background, a strong employment report from the Labor Department on Friday will probably do little to dial back market expectations that the Federal Reserve will cut interest rates this year. Fed Chairman Jerome Powell said on Tuesday the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

Nonfarm payrolls probably increased by 185,000 jobs last month after surging 263,000 in April, according to a survey of economists. That would be well above the roughly 100,000 needed per month to keep up with growth in the working-age population.

“The trade wars the United States finds itself ensnared in are going to cause hiring to slow as business sentiment eases, productivity-enhancing capital
expenditures fall off, and the damage eventually spills over into the consumer sector,” said Joseph Brusuelas, chief economist at RSM US in New York.

But May’s job growth could disappoint after a report on Wednesday from payrolls processing firm ADP showed the smallest gain in private payrolls in nine years last month. Another report this week showed a drop in online adverts by businesses looking for help.

The ADP report, however, has a poor record predicting the private payrolls component of the government’s employment report because of methodology differences. Other labor market measures such as weekly applications for unemployment benefits and the Institute for Supply Management’s services employment gauge have suggested solid employment gains in May.