May Jobs Report Expected to Show Tepid Growth, Steady Unemployment

WASHINGTON: In May, U.S. job growth probably decelerated significantly as companies faced challenges from tariff uncertainties, yet it likely won't be enough for a wary Federal Reserve to start lowering interest rates again soon. The Labour Department's highly anticipated employment report on Friday is also predicted to indicate the unemployment rate remaining stable at 4.2 per cent for the third consecutive month, along with robust wage growth, which should sustain the economy for the time being. However, the economic outlook is deteriorating, and economists believe President Donald Trump's inconsistent stance on tariffs has hindered companies' capacity to organise for the future.

They anticipated that May would signify the onset of diminished job growth. Resistance from staunch conservative Republicans in the U.S. Senate and billionaire Elon Musk to Trump's tax-cut and spending legislation introduced further uncertainty for businesses. "The economy is trapped in a pressure cooker scenario with escalating temperatures," stated Brian Bethune, an economics professor at Boston College. "Tariff policies are evolving every day, making it evident that planning in such an environment is not favourable for any hiring." According to a Reuters survey of economists, nonfarm payrolls probably grew by 130,000 jobs last month following an increase of 177,000 in April. That would fall short of the three-month average of 155,000, yet remain above the approximately 100,000 jobs monthly that experts believe are necessary to match the growth of the working-age population.

Predictions varied between 75,000 and 190,000 jobs created. A significant portion of the job increase this year indicates companies retaining employees. "Companies have grasped from previous recessions that being too aggressive in cutting staff or reducing investment during economic downturns can make it difficult to rehire or to restart investment when the economy rebounds," stated Andrew Husby, a senior economist at BNP Paribas Securities. "The current dynamic is still in place, and we observe a continued low-hiring, low-layoff landscape this spring." Economists think this situation might keep the U.S. central bank inactive until year-end. Financial markets anticipate that the Fed will maintain its overnight benchmark interest rate in the 4.25 per cent- 4.50 per cent range this month, before starting to ease policy in September.

ALSO READ: Tesla Shares Tumble, $150 Billion Wiped Amid Trump-Musk Feud

"However, with both big and small companies signalling their intention to retain employees and weather the tariff challenges, only a slight decline in the job market is expected, which further lessens the need for Fed assistance," stated Seema Shah, chief global strategist at Principal Asset Management. "We anticipate that the Fed will hold off on lowering policy rates until the fourth quarter." The expected slowdown in job growth last month would be a result of the surge in imported goods that increased employment in the transportation and warehousing sectors in April. Additional employment opportunities likely emerged in the healthcare field, yet a significant decline in tourist visits due to trade disputes and Trump's frequent wish to annexe Canada as the 51st state and obtain Greenland may hinder jobs in leisure and hospitality. 

Production payrolls likely stayed sluggish as factories dealt with tariffs on raw materials, such as auto parts. Employment in construction may soon face challenges due to 50 per cent tariffs on aluminium and steel. "Companies have grasped from previous recessions that being too aggressive in cutting staff or reducing investment during economic downturns can make it difficult to rehire or to restart investment when the economy rebounds," stated Andrew Husby, a senior economist at BNP Paribas Securities. "The current dynamic is still in place, and we observe a continued low-hiring, low-layoff landscape this spring." Economists think this situation might keep the U.S. central bank inactive until year-end. Financial markets anticipate that the Fed will maintain its overnight benchmark interest rate in the 4.25%-4.50% range this month, before starting to ease policy in September.

"However, with both big and small companies signaling their intention to retain employees and weather the tariff challenges, only a slight decline in the job market is expected, which further lessens the need for Fed assistance," stated Seema Shah, chief global strategist at Principal Asset Management. "We anticipate that the Fed will hold off on lowering policy rates until the fourth quarter." The expected slowdown in job growth last month would be a result of the surge in imported goods that increased employment in the transportation and warehousing sectors in April. Additional employment opportunities likely emerged in the healthcare field, yet a significant decline in tourist visits due to trade disputes and Trump's frequent wish to annexe Canada as the 51st state and obtain Greenland may hinder jobs in leisure and hospitality. Production payrolls likely stayed sluggish as factories dealt with tariffs on raw materials, such as auto parts. Employment in construction may soon face challenges due to 50 per cent tariffs on aluminium and steel.