U.S. hiring slowed in May as employers added just 75,000 jobs, a sign that businesses have become more cautious in the face of slowing global growth and widening trade conflicts.
The tepid job growth, along with rising pressures on the economy, makes it more likely that the Federal Reserve will cut rates in the coming months. Bond yields fell after the jobs data was released, signaling investor expectations for lower Fed rates.
Last month’s modest job growth followed a much healthier gain of 224,000 in April. The unemployment rate remained at a nearly 50-year low of 3.6%.
The hiring gains last month were the fewest since February. The government also revised down the job growth for March and April by a combined 75,000. In the first five months of this year, hiring has averaged 164,000 a month, a solid pace that is enough to lower the unemployment rate over time. Still, it’s below last year’s pace.
The economy is showing signs of sluggishness just as the current expansion has reached its 10th anniversary. Next month, it will become the longest period of uninterrupted growth on records dating to 1854. Yet consumers have turned cautious about spending, and companies are scaling back their investment in high-cost machinery and equipment.
The economy expanded at a healthy 3.1% annual rate in the January-March quarter, but the Federal Reserve Bank of Atlanta estimates that annual growth will slump to just 1.5% in the April-June quarter.
In May, wages rose 3.1% from a year earlier, down slightly from last month’s gain of 3.2%. That was the smallest annual gain since September.
Hiring was weak last month across a broad range of industries. Manufacturers added only 3,000 jobs, a fourth straight month of anemic gains. Construction companies hired just 4,000, financial services only 2,000.
Employers in several industries cut jobs. Retailers shed workers for the fifth straight month as stores struggle with online competition. A category that includes telecom, publishing, and media shed 5,000 jobs. Federal, state and local governments cut 15,000.
Trump’s trade wars have become a growing threat. Last month, he 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 — are causing some 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 shedding 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 lay off 14,000 workers.
Home sales have also been weak this year despite a sharp drop in mortgage rates. Sales fell 4.4% in April compared with a year earlier. Price increases are slowing in much of the country, though, which, combined with more affordable mortgages, could soon revive sales.