Economy added just 75,000 jobs in May, strengthening case for Fed interest rate cut

Hiring was weak in May as employers added 75,000 jobs, bolstering the Federal Reserve’s case for cutting interest rates as soon as this month, a possibility that has juiced markets in recent days.

The unemployment rate was unchanged at a 50-year low of 3.6%, the Labor Department said Friday.

Economists surveyed by Bloomberg expected 178,000 job gains.

Adding to the concerns: Payroll gains for March and April combined were revised down by a total 75,000. March’s additions were revised from 189,000 153,000, and April’s, from 263,200 24,000.

The May employment report was highly anticipated because of recent speculation that the Fed could cut its benchmark rate for the first time in a decade as soon as this month, especially if the economy softens. The jobs report typically provides the best real-time gauge of the labor market and economy.

In recent days, Fed policymakers have indicated they’re prepared to trim rates if necessary, noting concerns that the recent escalation of U.S. trade battles with both China and Mexico could further impede already slowing growth. A stock market that was tumbling amid the trade jitters has rallied since Fed officials have raised the possibility of rate cuts, which tend to increase consumer and business borrowing and prod investors to move money from bonds to higher-yielding stocks.

Yet the Fed faces difficult choices. Monthly job numbers  an be volatile. Payroll growth generally has been strong this year, with average gains of about 200,000 a month.

Meanwhile, stocks advanced Thursday on the news that the U.S. and Mexico made progress in talks on President Trump’s demand that Mexico do more to stem the flow of Central American illegal immigrants through the Mexican border. The White House, however, has not yet backed off its threat to impose tariffs on all Mexican imports on Monday if Mexico doesn’t take more aggressive action.

More broadly, job growth is expected to slow from 223,000 in 2018 to about 175,000 this year as the effects of federal tax cuts and spending increases fade. And the historically low unemployment rate has made it tougher for businesses to find qualified workers, a dynamic that’s also likely to crimp job growth.