US job growth slowed sharply in May, the Labor Department reported on Friday. The surprisingly weak report creates new doubts about the economy’s strength and convinced many analysts that the Fed would delay if not cancel plans for more rate hikes. But Boston Fed President Eric Rosengren on Monday said he expects growth will remain strong enough to tighten policy in the near term. “It is my expectation that economic conditions will continue to gradually improve, which in turn would justify further actions to normalize policy, continuing a gradual return to a more normal rate environment,” he advised in a speech in Finland.
If it turns out that the US economy is headed into recession, “policy makers are far from prepared,” writes Justin Wolfers, a professor of economics and public policy at the University of Michigan.
A new forecast from the National Association for Business Economics predicts that US growth will fall to its slowest pace in four years in 2016—just 1.9%. In addition, the group projects that US corporate profits will post a decline this year for the first time since 2011.
US service sector activity eased to the slowest growth rate in two years in May, according to Friday’s update of the ISM Non-Manufacturing Index. Meanwhile, the revised May data for the
US Services PMI ticked lower, dipping to 51.3 for last month—a sluggish rate that’s just above the neutral 50 mark, Markit Economics reported. “The service sector reported one of the weakest expansions seen since the recession in May, adding to signs that any rebound of the economy in the second quarter may be disappointingly muted,” said Chris Williamson, Markit’s chief economist.
US factory orders in April posted the strongest gain in six months, according to Commerce Department figures, driven by a hefty rise in demand for commercial aircraft.
Global economic activity remained sluggish in May, according to the JP Morgan Global All-Industry Output Index. The benchmark was fractionally lower last month at 51.1 vs. 51.6 in April—close to the neutral 50 mark that separates growth from contraction. “The global economy remained in a low growth gear in May, continuing its generally weak start to the year,” says David Hensley, Director of Global Economic Coordination at J.P.Morgan. “A slower expansion was seen at service providers, while manufacturing production broadly stagnated.”