watch
A sharp decline in the pace of hiring in May, especially in sectors dependent on trade, suggests that the president’s tariffs are starting to bite.
Lawmakers, business executives and economists have all tried to warn President Trump that his trade policies could hurt growth. On Friday, the government reported that employers added just 75,000 jobs in May, a fact that will be hard for him to ignore.
The increase was a far cry from what economists had expected and a fraction of the number of jobs created in April. The weakness was most evident in sectors that depend on exports, and analysts were quick to blame Mr. Trump’s tariffs on China and other countries.
The new data from the Labor Department also increases the likelihood that the Federal Reserve will cut interest rates, and is the latest sign that the economy is slowing.
“This should be a clear warning to the administration and the Federal Reserve to tread very carefully on the policy front,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “The May jobs report gives us a taste of what’s ahead if these trade threats continue.”
The economy started the year strong, expanding by 3.1 percent in the first quarter, and the payroll figures don’t suggest that a downturn is imminent. The current recovery has defied recession predictions several times, and this month it tied a record for longevity with the boom of the 1990s.
Nor was the news all bad. Unemployment was unchanged at 3.6 percent, the lowest that number has been in about 50 years. And average hourly earnings increased by 0.2 percent, which was less than expected but better than earlier in the recovery.
Mr. Trump’s announcement late Friday that he was suspending a plan to impose new tariffs on Mexico, which would have taken effect Monday, should help ease concerns about rising trade tensions.
Monthly jobs data can be volatile, with big swings already in January, February and March of this year. But the slow pace of hiring in May followed other disappointing indicators. Oil prices and yields on Treasury bonds have both plunged, which suggests traders expect slower growth.
The huge corporate tax cut enacted in late 2017 served as a tailwind for the economy in 2018 and early 2019, but the impact is beginning to fade. In the first five months of 2019, the economy added an average of 164,000 jobs, down from an average gain of 223,000 for all of 2018.
What’s more, retail sales and factory orders declined in April, an indication that consumers and businesses are becoming more cautious. The jobs report on Friday also revised down hiring data in March and April by 75,000.
“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.”
At big companies, tariffs are the leading cause of those jitters. The Trump administration has been putting pressure on China for months, but tensions increased last month when negotiators failed to reach a deal and the administration raised tariffs on $200 billion worth of Chinese imports.
President Trump threatened Mexico with tariffs on May 30, when he said the administration would place a 5 percent duty on imports from that country to compel it to halt the flow of Central American immigrants to the United States.
Many Senate Republicans opposed those tariffs, and the Mexican government sent senior government officials to negotiate with the Trump administration. About 8:30 p.m. on Friday, Mr. Trump said that the United States and Mexico had reached an agreement on immigration and that the tariffs were “indefinitely suspended.”
While that decision is sure to please many businesses, the duties the administration has placed on China and other countries have already forced large manufacturers, home contractors and other businesses to pay higher prices for components and basic materials. Analysts believe that businesses will eventually have to pass these higher costs on to consumers by raising prices.
“It may not lead to firing but it may cause businesses to postpone hiring,” said Michelle Meyer, chief United States economist at Bank of America Merrill Lynch.
Ms. Meyer’s economic forecast calls for growth to slow to less than 1.5 percent in the second half of the year. In the current quarter, she estimates the economy will grow by 1.9 percent; other analysts think growth will be closer to 1 percent.
https://www.nytimes.com/2019/06/07/business/economy/may-jobs-report-economy.html
Name and cite one thing that has increased in price from China? Anything. Go back and get a price from a year ago and now and prove that prices are higher.