US job growth slowed in May amid uncertainty about the Trump administration’s import tariffs, but solid wage growth should keep the economic expansion on track and potentially allow the Federal Reserve to delay resuming its interest rate cuts.
The ebbing labour market momentum reported by the Labour Department yesterday was underscored by sharp downward revisions that showed 95,000 fewer jobs were added in March and April than previously estimated over the two-month period.
The unemployment rate held steady at 4.2 per cent for the third consecutive month because 625,000 people dropped out of the labour force, suggesting a lack of confidence in the jobs market. Surveys have shown that consumers are less optimistic about their prospects of finding a job in the event of being laid off. Economists say President Donald Trump’s flip-flopping on import duties has hampered businesses’ ability to plan ahead. Opposition to Trump’s tax-cut and spending bill from conservative Republicans in the US Senate and tech billionaire Elon Musk has added another layer of uncertainty for companies.
“Cracks in the façade of labour market resilience are now starting to show and the longer the tariff uncertainty and government spending cuts continue, the worse the labour market reports are bound to be,” said Scott Anderson, chief US economist at BMO Capital Markets.
Nonfarm payrolls increased by 139,000 jobs last month after a downwardly revised rise of 147,000 in April, the Labour Department’s Bureau of Labour Statistics said.
Economists polled by Reuters had expected the survey of establishments to show 130,000 jobs added after a previously reported gain of 177,000 in April. The payrolls count for March was slashed by 65,000 to 120,000.
Economists said factoring in the sharp downgrades to March and April data, payrolls last month rose by a meagre 44,000 jobs. The revisions lowered the three-month average of employment gains to 135,000 from 155,000 in April.
The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. That number could drop as Trump has revoked the temporary legal status of hundreds of thousands of migrants as part of his administration’s immigration crackdown. Employment gains remained concentrated in the healthcare sector, which added 62,000 jobs that were spread across hospitals, ambulatory services and skilled nursing care facilities. Leisure and hospitality payrolls rose 48,000, driven by hiring at restaurants and bars, which some economists welcomed as a sign of the economy’s resilience.
Social assistance employment increased by 16,000 positions. Construction payrolls rose 4,000, though there were job losses among residential specialty trade contractors. Economists attributed those losses to work opportunities drying up because of tariffs.
There were also moderate employment gains in financial activities, transportation and warehousing as well as wholesale trade sectors.
But federal government payrolls decreased by 22,000 and are down 59,000 since January amid an unprecedented campaign by the White House to drastically reduce the government’s footprint. The mass firings have been blocked by a federal judge. Reinstated workers put on paid leave are counted as employed. The same applies to those who have accepted buyout offers.
Manufacturing shed 8,000 jobs, mostly in machinery production. There were also job losses at retailers. Temporary help employment, a harbinger for future hiring, tumbled by 20,200 positions.
The share of industries reporting employment gains dropped to a 10-month low of 50.0pc from 51.8pc in April. Job growth mostly reflects worker hoarding by businesses, anchoring the labour market and economy through higher wages.
Average hourly earnings increased 0.4pc after gaining 0.2pc in April. In the 12 months through May, wages rose 3.9pc, matching April’s advance.
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