U.S. Economy This Week: Employment Struggles, Tariff Disruption

Trump's evolving tariffs have disrupted the economy, though manufacturing and service output may be rising. Here are the numbers and Robert Genetski's analysis and forecast.

Guest post by economist Robert Genetski, Ph.D.

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Last Friday’s employment report confirmed the weakness in jobs reported in the week’s ADP data. ADP reported job growth slowed to 37,000 in May, down from 60,000 in April.

Friday’s Bureau of Labor Statistics report showe private-sector jobs in May were up by 140,000. However, large downward revisions to March and April suggest the May numbers will also be revised sharply lower. The sharp drop in full-time jobs also points to a serious slowdown in a key area.

Different business surveys last week provided very different conclusions about what happened in May. S&P’s surveys for manufacturing and service companies point to an improvement in both manufacturing (up to 52 from 50) and service companies (up to 54 from 52). This contrasted with the more closely followed ISM surveys, which reported both manufacturing and service businesses at 48.5 and 49.9. Both were below break-even, which is 50.

Based on the employment reports, the ISM survey appears closer to describing a significant slowdown. However, manufactures shipments and orders through April provide some hope that the economy is doing better than the jobs data or ISM surveys would suggest.

Bottom line: highly disruptive tariffs have distorted what is happening in different sectors of the economy. While tariffs help some areas, they hurt others. Overall, these tariffs are having a negative impact. Measuring the economy’s strength or weakness will be difficult until the tariffs go away or at least stabilize.

This week’s data releases begin on Wednesday, with the May Consumer Price Index. The Cleveland Federal Reserve Bank estimates total CPI will be up 0.13 percent and the core up 0.23 percent. If these estimates are correct, the yearly inflation rates for both the total and core CPI will remain about 2½ percent.

Also on Wednesday, the Treasury will release May data for federal spending and receipts. This will provide four months of federal spending to compare to the same four months a year ago. Ideally, this data can provide an early clue on the extent of spending constraints from the president’s efforts to cut costs.

Thursday’s May wholesale price data will be impacted by Trump’s tariffs. In April, wholesale prices for finished goods were up at a 6 percent annual rate, and wholesale prices for core final demand goods were down at a 5 percent annual rate. As with so
much other information, wholesale prices are distorted by the tariffs.