Overall job growth in the month of May was disappointing to say the least. Economists expected the addition of 180,000 jobs last month. However, The Bureau of Labor Statistics announced that actual jobs added fell well below forecasts. The economy added just 75,000 jobs.
According to Chris Zaccarelli, Chief Information Officer for the Independent Advisor Alliance, “this is a clear warning sign that the trade war is doing serious damage to the economy.” Job growth has slowed in various sectors including manufacturing, retail, transportation, automobile, and agriculture.
Last year, manufacturing job growth averaged 20,000 to 25,000 per month. This year, manufacturing job growth is barely positive. This reflects the constriction of global trade caused by the ongoing trade war between the United States and China. The tit-for-tat tariffs could potentially slow economic growth 0.5% by 2020.
Although there is no concrete evidence that a recession is on its way, it is clear that economic growth is slowing down. This has drawn attention to what the Fed will do to combat the slowdown in economic growth and cushion consumers and businesses.
The Fed is currently in a tricky position as their target interest rate is quite low by historical standards. The question is no longer whether or not the Fed will cut interest rates, but rather when. The market is expecting a quarter-point cut in interest rates in July.
The Fed will meet with its chairman, Jerome Powell, to discuss its plan of action on June 18-19.