U.S. Economy Slows in May, Creates Fewer Jobs Than Expected

The U.S. economy is showing signs of weakness and things could get worse. In May, the U.S. created just 75,000 jobs, far lower than Wall Street expected. Wage growth has also slowed significantly. A slowdown means American consumers are going to have less money in their pockets, which is bad news for an economy that gets 70% of its gross domestic product (GDP) from consumer spending.

The U.S. Bureau of Labor Statistics announced that the U.S. economy created 75,000 jobs in May. That number shocked the markets. Wall Street was expecting the U.S. to add 185,000 jobs in May. This translates into a four-month average of 127,000; the slowest pace since 2012. Over the first two years of President Trump’s tenure in the Oval Office, the monthly average was 201,000.1

Despite the jobless rate remaining near historic lows of 3.6%, the weak jobs data suggests economic momentum is waning and has actually spread to the labor market. Typically, strong employment translates into higher wages, since businesses want to attract people. But this hasn’t happened. U.S. workers only received an average hourly raise of six cents. That’s the same increase they received in April.

Thanks to an escalating trade war with China, and ongoing concerns that President Trump could still hit Mexican imports with tariffs, the slowdown in hiring could get even worse. To prevent a fallout, many expect the Federal Reserve will step in and cut interest rates. Something the markets always cheer.

Until then, Wall Street analysts will be paying close attention to other economic indicators, like payroll and the Institute for Supply Management’s non-manufacturing survey. If the economic indicators shows signs of a downtrend, investors can bet that the U.S. economy will slow even more, which will impact everything from jobs, to wages, consumer spending, the U.S. dollar, and equities.

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  1. “The Employment Situation – May 2019,” U.S. Bureau of Labor Statistics, June 7, 2019; https://www.bls.gov/news.release/pdf/empsit.pdf.

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