The government report on Friday showed a sharp decline in the pace of hiring, adding to concern that the economy is slowing.
The latest report was a disappointing showing that will stoke fears the economy is softening as the Trump administration’s trade war with China and potentially Mexico escalates.
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.
“This gives us a real sense of deceleration in the U. S. economy,” said Diane Swonk, chief economist at accounting firm Grant Thornton. “We knew this was occurring, but this could be a summer of discontent. It also gives the Fed a green light to cut rates.”
Most analysts expect the economy to slow in the current quarter, after 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.
However dramatic the fall off in hiring was in May, it’s part of a larger trend suggesting that the labor market has cooled from last year, when tax cuts provided a short-term lift. 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.
The retail sector, battered by the rise of e-commerce, lost jobs for the fourth month in a row. The sector has given up 50,000 jobs since January.
The share of Americans working or looking for a job was unchanged at 62.8 percent. Some economists had thought that number would rise as people were lured back into the labor market by signs of growth earlier this year.
Friday’s report also revised employment data for April and March downward by a total of 75,000 jobs.
“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.”
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.
“The May jobs report gives us a taste of what’s ahead if these trade threats continue to escalate,” said Scott Anderson, chief economist at Bank of the West. “Hiring faded across the board in May. This doesn’t appear to be a one-month pattern.”
Michelle Meyer, chief United States economist at Bank of America Merrill Lynch, said she was evaluating job creation in the goods sector, relative to hiring in service industries. “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.
Indeed, hiring in goods-producing industries like manufacturing, mining and logging, and construction slowed to a crawl in May, while the services sector showed vigor.
