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What to Expect From the May Jobs Report Employers Added 75,000 Jobs in May; Unemployment Steady at 3.6%
(32 minutes later)
The Labor Department will release its estimate of hiring and unemployment for May at 8:30 a.m. Eastern time. The monthly report provides a snapshot of the American economy. The Labor Department released its latest estimate of hiring and unemployment on Friday morning. The monthly report provides one of the most reliable pictures of the American economy.
Analysts on Wall Street are predicting a gain of about 175,000 jobs, according to Bloomberg, compared with an increase of 263,000 in April. 75,000 jobs were created last month. Analysts had expected a gain of about 175,000 jobs, according to Bloomberg.
The unemployment rate is expected to remain unchanged at 3.6 percent. That was a 50-year low and shows just how far the current expansion has come. The unemployment rate was 3.6 percent, the same as in April.
Average hourly earnings are expected to rise 0.3 percent, compared with a 0.2 percent increase in April. That would bring the 12-month increase to 3.2 percent. Average hourly earnings rose by 0.2 percent, which follows an increase of 0.2 percent in April. Over the last 12 months, earnings have risen by a solid 3.1 percent.
Wall Street is looking for solid employment gains for May, but a big surprise may be in store. The Census Bureau is staffing up ahead of its 2020 survey, and if many of those temporary hires were brought on board in May, they could add hundreds of thousands of jobs to the headline number. Employers added 75,000 jobs last month, a disappointing showing that will stoke fears the economy is softening as the Trump administration’s trade war with China and potentially Mexico escalates.
Even with that potential swing, other factors could influence the number. In April, payrolls grew much more than expected, so some moderation may be in store. Wrap in softness in manufacturing and trade worries, and you have the ingredients for an especially hard-to-predict report. Before this report, analysts had expected a gain of 175,000 jobs. In addition to falling short of that estimate, hiring in May was well below the April pace.
[Here’s a primer on where the numbers come from and what they mean.] The Federal Reserve has signaled that it would consider a rate cut in the event of economic weakness, and May’s data is likely to be an important factor in their decisions.
President Trump’s escalating trade war with China and the possibility of new tariffs on Mexican imports have unsettled the financial markets. Analysts will be closely watching the May data for any sign that these moves are hurting the economy or are making employers more cautious about adding workers. Most analysts expect the economy to slow in the current quarter, following a growth rate of 3.1 percent in the first three months of the year. Both retail sales and factory orders declined in April, a sign that consumers and businesses are growing more cautious.
“It may not lead to firing, but it may cause businesses to postpone hiring because of the uncertainty,” said Michelle Meyer, chief United States economist at Bank of America Merrill Lynch. “Over all, the economy is on a fragile footing,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We’re still talking about solid growth at the start of the year but that’s in the rearview mirror. The name of the game is uncertainty.”
Ms. Meyer said she would be evaluating job creation in the goods sector, which includes manufacturing, relative to hiring in the service sector. “If global weakness or the trade war filters in, it’s going to have a bigger impact on the goods side of the economy,” she said. President Trump’s escalating trade war with China and the possibility of new tariffs on Mexican imports have unsettled the financial markets. Analysts are parsing the data for any sign that his policies are hurting the economy or are making employers more cautious about adding workers.
“It may not lead to firing but it may cause businesses to postpone hiring because of the uncertainty,” said Michelle Meyer, chief United States economist at Bank of America Merrill Lynch.
Ms. Meyer said she was evaluating job creation in the goods sector, which includes manufacturing, relative to hiring in the service sector. “If global weakness or the trade war filters in, it’s going to have a bigger impact on the goods side of the economy,” she said.
Her economic forecast calls for growth to slow to less than 1.5 percent in the second half of the year.
Not all tariffs are created equal, said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce. The threat of new duties on Mexican imports poses different risks than the tariffs imposed on China.Not all tariffs are created equal, said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce. The threat of new duties on Mexican imports poses different risks than the tariffs imposed on China.
The China tariffs have been building for months, but many business leaders believe Mr. Trump could reach a deal with President Xi Jinping.The China tariffs have been building for months, but many business leaders believe Mr. Trump could reach a deal with President Xi Jinping.
“The shift to Mexico was totally unexpected and it caught people by surprise,” Mr. Bradley said. That effect, he said, was heightened because it came in a statement from the White House, “rather than as an aside to the press or a social media post.”“The shift to Mexico was totally unexpected and it caught people by surprise,” Mr. Bradley said. That effect, he said, was heightened because it came in a statement from the White House, “rather than as an aside to the press or a social media post.”
Every 10 years, the Census Bureau hires an army of temporary workers. Diane Swonk, chief economist at the accounting firm Grant Thornton, thinks the first big wave of that mobilization happened last month. The Fed is paying close attention to the jobs figures. On Tuesday, Jerome H. Powell, the central bank’s chairman, hinted that policymakers were prepared to cut rates if the trade war hurt the economy.
“This is all a tall order in an economy in which workers are becoming scarce,” she said. Until relatively recently, the expectation was that the Fed would continue raising its benchmark interest rate, something it started doing in December 2015. The Fed changed course in January, with Mr. Powell suggesting that very modest inflation and weakness in Europe and China warranted a neutral stance.
The process wreaks havoc with the monthly jobs figures because of the magnitude of the hiring. In May 2010, new census workers added 411,000 to the employment data.
As of March, the bureau had hired only about 800 workers. “They really have to get these people on board,” Ms. Swonk said, noting that the mapping and checking of addresses has to begin soon.
Some economists had predicted that the wave would hit in April, but there was little to no census-related hiring in the Labor Department report for the month. That could make a May bump more likely.
“Underlying payroll growth will be solid, not spectacular,” Ms. Swonk said. “But the wild card is the census.”
The Federal Reserve will be paying close attention to the jobs figures. On Tuesday, Jerome H. Powell, the Fed chairman, hinted that the central bank was prepared to cut rates if the trade war hurt the economy. A weak employment report would be one data point suggesting that the economy was indeed softening.
Until relatively recently, the Fed was considered likely to continue the interest rate increases that began in December 2015. The Fed changed course in January, with Mr. Powell suggesting that very modest inflation and weakness in Europe and China warranted a neutral stance.
The stock markets took Mr. Powell’s remarks on Tuesday as a sign that the next Fed move might be a rate cut, prompting a rally.The stock markets took Mr. Powell’s remarks on Tuesday as a sign that the next Fed move might be a rate cut, prompting a rally.
If the jobs report is very weak, Carl Tannenbaum, chief economist at Northern Trust, said, “the Fed will need to think very seriously about a pre-emptive rate cut.” After government reports showed substantial employment gains in March and April and a growth rate of more than 3 percent in the first quarter, it appeared that fears of a recession were overdone. Now those concerns are back.
After government reports showed substantial employment gains in March and April and a growth rate of more than 3 percent in the first quarter, it appeared that fears of a recession had been overdone. Now those concerns are back. Bond yields recently dropped to their lowest level since 2017. This isn’t what is supposed to happen when the economy is strong. During good times, the interest rate on government bonds usually rises, as investors plough their money into riskier assets. Plunging bond yields are a sign that investors are worried that growth is about to falter.
Bond yields recently dropped to their lowest level since 2017. This isn’t how it’s supposed to happen when the economy is strong. During good times, the interest rate on government bonds usually rises, as investors plow their money into more risky assets. Plunging bond yields signal worries that growth is about to falter.
Crude oil prices, which typically rise when traders expect the economy to charge ahead, are down about 20 percent since late April.Crude oil prices, which typically rise when traders expect the economy to charge ahead, are down about 20 percent since late April.
The current economic recovery has defied recession predictions several times, matching the record longevity of the 1990s expansion. The current economic recovery has defied recession predictions several times. This month, the current expansion tied a record for longevity with the recovery of the 1990s.
Nevertheless, Mr. Tannenbaum puts the risk of a recession higher than at any time since the 2008 financial crisis. “They say that policy errors, not old age, end expansions, and the steps taken on the trade front in the last five weeks fall under that,” he said. Nevertheless, Carl Tannenbaum, chief economist at Northern Trust, puts the risk of a recession higher than at any times since the financial crisis of 2008. “They say that policy errors, not old age, end expansions, and the steps taken on the trade front in the last five weeks fall under that,” he said.
At Glassdoor, the jobs site, new listings for positions at small employers are outpacing activity at the biggest companies. Hiring at businesses with 50 or fewer employees is up 22 percent from a year ago, while job postings are down 3 percent at companies with more than 5,000 employees.
“If you are looking for sectors that would slow hiring because of uncertainty today, it would be large employers,” said Andrew Chamberlain, chief economist at Glassdoor. “Small companies are doing business locally.”
The Chicago-based technology and logistics company ShipBob isn’t tiny — it has about 500 employees — but it has been hiring at a furious pace. The company helps online retailers offer two-day shipping — vital if they want to keep up with Amazon and other large retailers. It also offers systems that let clients track inventories and route orders to the nearest warehouses.
Not that it’s easy to find new workers. “It’s a very competitive market,” said Lauren Alford, director of recruiting and onboarding at ShipBob. To attract white-collar employees, ShipBob offers an unusual perk — unlimited time off.
“People don’t abuse it,” said Kristina Lopienski, content marketing manager at ShipBob. “We are offering that flexibility if something comes up personally. We’re not watching you clock in and clock out.”
In addition to hiring salaried employees at its Chicago headquarters, ShipBob has been recruiting hourly workers at five fulfillment centers. In May, the company hired more than two dozen at headquarters and over 50 at those warehouses.
That’s good news as new college graduates enter the job market, said Tom Gimbel, chief executive of LaSalle Network, a Chicago recruiting and staffing company.
Jobs that used to offer starting salaries of $30,000 to $40,000 are paying $40,000 to $50,000, Mr. Gimbel said. “I’m talking about liberal arts graduates, not engineering or accounting majors,” he said. Many entry-level positions in fields like sales, marketing and human resources routinely pay $40,000 to $45,000.
“My clients are investing,” Mr. Gimbel said. “They’re not afraid to pull the trigger.”
Nor are clients jittery about the recent volatility on Wall Street. “It mirrors the political landscape,” he added. “Just the way Trump creates chaos, people don’t see the chaotic market as an indicator.”