US Economy Braces for Soggier Second Half Than Anticipated, Economist Predicts
Job growth in the private sector slumped severely in May, according to ADP, with only 37,000 positions added, marking the lowest figure in over two years.
Buckle up, folks! The US economy might be sailing through choppier waters than we initially thought for the rest of the year. According to Brian Wesbury, chief economist at First Trust Advisors, the landing could be bumpier than investors assume.
In a recent discussion, Wesbury flagged potential rough seas with a hint of a recession on the horizon. But let's not get the lifeboats ready just yet. We're talking about 2025, so we've got a little time to keep our sea legs steady.
But first, let's talk jobs. The private sector shed a mere 37,000 jobs in May, according to ADP. Yeah, you read that right. After enjoying a promising start, hiring seems to be losing steam, reminiscent of the hesitancy seen in January 2023 during periods of market tumult [1][2].
The leisure and hospitality industry managed to eke out some growth by adding 38,000 positions, but it wasn't enough to offset the losses in other sectors. Financials, information, and construction struggled, with each contributing fewer than 10,000 jobs. And the real heavyweights, professional and business services, education and health services, natural resources and mining, trade, transportation and utilities, and manufacturing, all took a hit [3].
But fear not, entrepreneurs and small businesses didn't let the rough waters deter them. They plowed ahead, adding 13,000 jobs. And those larger establishments, with over 500 employees, managed to stay afloat, contributing 49,000 jobs [3].
Now, over to President Trump, who took to Truth Social to voice his concern and suggest a remedy for the soaking wet economy: lower interest rates. He urged Federal Reserve Chairman Jerome Powell to take a dip in the rate-lowering pool, mimicking moves Europe has made a stunning nine times [4].
In response, Chairman Powell met with President Trump at the White House, though the matter of monetary policy was left untouched. The Fed simply reported that their future decisions would be based on the incoming economic data and whatever implications that may have for the outlook [4].
The ADP numbers drop ahead of the Labor Department's nonfarm payrolls report, which is scheduled for Friday morning. The report is projected to show a 130,000 increase—a far cry from the 177,000 gain reported in April [1].
If these trends persist, they could be warning signs of bigger storms brewing and conversations around recession risks heating up [1][2]. The Federal Reserve might weigh these conditions when making decisions about interest rates. Lower rates could potentially stabilize the economic waters, but the final decision will hinge on a delicate balance between economic growth, inflation, and labor market dynamics [5].
So, grab your umbrellas and life vests, folks. It seems like the economy might be asking for a little shade and shelter for the second half of the year. Keep your eyes on the news, and stay tuned for updates!
Enrichment Data:
- Overall: A Potential Economic Slowdown in the Private Sector
- Reasons for the Slowdown: Increasing economic uncertainty, Hiring momentum loss, Sectoral variability in job growth
- Implications for Potential Recession: Broader cooling of the labor market, Signs of economic weakness, Discussions about recession risks
- Implications for Federal Reserve Interest Rate Decisions: Calls for rate cuts, Balancing economic growth, inflation, and labor market conditions
- Sources:
- US private-sector job growth slows in May
- US companies add the fewest jobs in a year during May
- Private sector added 62k jobs in April, well below expectations, ADP says
- Trump and Powell meet at White House
- Fed saw inflation, jobless, stability risks at May meeting, minutes show
Business and finance sectors are bracing for potential inflation as the US economy may experience a slowdown, according to economist Brian Wesbury. This slowdown could lead to increased discussions about recession risks, which might prompt the Federal Reserve to consider lowering interest rates to stabilize the economic situation. The final decision, however, will hinge on a delicate balance between economic growth, inflation, and labor market dynamics.
