With worries rising about trade wars and slower global growth, Friday’s jobs figures for May could serve as a reminder that the U.S. economy is still mostly in good shape.
Or, an unexpectedly weak employment report could intensify concerns that after a healthy first quarter, the U.S. economy is actually stumbling.
Economists have forecast that the government will report that employers added 185,000 jobs, a solid figure consistent with this year’s average monthly gain. The unemployment rate is expected to remain at a nearly 50-year low of 3.6%, according to data provider FactSet.
The economy is showing signs of sluggishness after having expanded at a healthy 3.1% annual rate in the April-June quarter. Consumers have been cautious about spending, and companies are scaling back their investment in high-cost machinery and equipment.
The Federal Reserve Bank of Atlanta estimates that annual growth will slump to just 1.5% in the April-June quarter. That potential weakening has also raised pressure on Federal Reserve policymakers to consider cutting short-term interest rates in the coming months. For most of this year, the Fed has indicated that it would take a patient approach toward rate changes.
Manufacturers have barely added jobs in the past three months after healthy gains last year, a sign that trade conflicts and a slowdown in auto sales might be slowing hiring. Retailers, hammered by online competition, have cut jobs for the past three months. Home building and commercial construction have weakened, a trend that could force builders to shed workers.
Professional and business services, which include high-paying accounting and engineering jobs, have added workers at a healthy pace this year. So have the education and health services industries.
If employers remain optimistic about the long run, they might look beyond a weak patch for the economy and keep adding jobs. Additional strong hiring could provide vital support to the economy. Steady job growth has compelled many employers to raise pay to attract and keep workers, which, in turn, has forced up average hourly wages. Average wages rose 3.2% in April compared with a year ago, a solid if not exceptional gain.
President Donald Trump last month increased tariffs on $200 billion in Chinese imports from 10% to 25%. And last week, he threatened to impose 5% tariffs on all Mexican imports to the United States beginning Monday. Those taxes would rise each month until they reach 25% in October unless the Mexican government cuts off a flow of Central American migrants entering the United States from through Mexico.
The higher costs from the import taxes — and the potential for more — might be causing companies to scale back plans for spending, investment and expansion. Orders for machinery and equipment fell 1% in April. A strong dollar, which makes U.S. goods costlier overseas, has also slowed the production and export of manufactured goods. A separate report from the Fed showed that factory output fell 0.5% in April.
Automakers are cutting jobs and production as U.S. sales have slowed. Analysts expect auto sales to fall below 17 million this year after four years above that level.
Ford Motor Co. said last month that it was cutting 7,000 white-collar jobs — about 10% of its salaried workforce — as part of preparations for an industry driven more by electric and autonomous vehicles. Last year, GM said it would shed 14,000 workers.
Home sales have been weak this year despite a sharp drop in mortgage rates. Sales fell 4.4% in April compared with a year earlier. Home price gains are slowing in much of the country, though, which, combined with more affordable mortgages, could soon revive sales.