U.S. Outlook: A warning from the jobs report

Scott Anderson
Posted by Scott Anderson
Chief Economist

The May U.S. jobs report gave us a taste of what’s ahead if trade war threats continue to escalate and tariffs continue to grow. Hiring faded across the board in May with just 75,000 net new jobs created in the U.S. last month. The U.S. economy also created 75,000 fewer jobs in March and April than previously reported.

This is not just a one-off hiccup in the data, but part of a broader more prolonged pattern of labor market softening.

For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on June 7.

Key observations:
  • Disappointing U.S. jobs data suggest consumer spending slowdown in the months ahead.
  • We are now expecting the Federal Reserve to cut interest rates in Sept after disappointing jobs growth in May.
  • The Fed funds futures market is currently pricing in a high probability (77%) of a rate cut at the July FOMC meeting but this bet appears pretty aggressive given what we know today.
  • At this point, policymakers should tread carefully. De-escalating the trade war with Mexico and a Fed rate cut are going to be needed to keep the U.S. expansion going.

Read my full report.

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