WASHINGTON — President Donald Trump’s global trade war is posing a growing risk to the kind of robust job gains that the U.S. probably enjoyed again in June.
Data due Friday from the Labor Department cover the first weeks since the United States imposed steel and aluminum tariffs on some of its largest trading partners, with financial markets whipsawing on the latest trade developments and likely becoming more sensitive to disappointing economic figures.
What’s more, companies including motorcycle maker Harley-Davidson and auto manufacturer General Motors have warned of potential U.S. job losses due to Trump’s trade policies or retaliatory levies.
While analysts say June is too early to see significant fallout from trade tensions in the employment data, such forces are starting to emerge as a possible counterweight to the tax cuts buoying corporate investment and consumer spending — and boosting a labor market that’s shown little sign of slowing.
Yet anecdotal worries are mounting, with a U.S. factory survey on Monday showing executives “overwhelmingly concerned” about tariffs and two regional Federal Reserve presidents warning last week that a trade war increasingly is weighing on businesses and adding risks to the outlook.
“For now, the underlying fundamentals are strong enough and the stimulus the economy is receiving from fiscal policy is large enough to outweigh the uncertainty from protectionism,” said Michael Gapen, chief U.S. economist at Barclays in New York.
If there’s a marked slowdown in employment, particularly in manufacturing jobs, it would indicate that “the business sector may have gone on hold with its investment and hiring plans given the noise around protectionism.”
Even so, Gapen said he expects any such impact to show in July at the earliest.
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Those looking for early signs of a trade war will be eyeing manufacturing, which already is being buffeted by the tariffs that are in effect or about to be imposed.
The median estimate of economists for a gain of 15,000 jobs in the sector last month, following 18,000 in May, would be the weakest showing since September, when hurricanes hampered production.
The question is whether markets would read such cooling as an early sign of business uncertainty or a natural slowdown in a sector that saw jobs boom for eight months.
Trump administration officials say trade concerns are overblown.
“We think you’ll continue to see very strong employment,” Commerce Secretary Wilbur Ross said last week in a Bloomberg Television interview. “The biggest problem most American companies have now is finding enough qualified labor to do the expansion that they are putting forward.”
Jeremy Schwartz, a U.S. economist at Credit Suisse, sees it as the latter.
“The U.S. manufacturing picture should probably slow a little bit just from its current pace,” Schwartz said by phone. A “modest slowdown would be a fairly reasonable forecast given the outperformance we’ve had,” he said.
While factory executives have been worried about the effect of trade tariffs on prices and already-constrained supply chains, when it comes to employment the shrinking pool of skilled workers remains a paramount concern, according to the Institute for Supply Management.
Tariffs even may be spurring at least temporary boosts in demand and aggravating bottlenecks, as an index of supplier delivery times rose in June to the second-highest level since 1979.
Some slowing, unrelated to tariffs, also may make sense as global economic growth shows signs of cooling and monetary policy becomes less of an engine supporting expansion, according to Jim Paulsen, chief investment strategist at Leuthold Group in Minneapolis.
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“Trade or not, there’s a question about how much impact the slowdown overseas is already having,” he said. “I don’t know if it’s trade one should worry about as much as just” a change in the global growth picture, he said. “That’s, to me, the bigger issue.”
While some Fed officials have relayed concerns over the negative impact of tariffs, they’re also watching the wage figures for any sign inflation will drift further above the central bank’s two percent target.
An monthly gain of 0.3 percent or more in June — the median estimate of economists — could signal strengthening inflation, according to George Goncalves, head of Americas fixed-income strategy at Nomura Securities International.
That, in turn, would reinforce market expectations for higher interest rates, and drive the 10-year Treasury yield back up toward three percent.
But this time, he said the market also is worrying about another factor. “Trade negotiations could cloud the reaction in markets,” Goncalves said by phone. In the current environment, “a slowdown in average hourly earnings could have twice the impact of an upside surprise.”
Paulsen said one outcome on the employment data that could throw financial markets for a loop would be faster-than-expected wage gains, such as a three percent annual rise, in concert with weaker-than-forecast payrolls.
“The market is just more vulnerable to bad news anywhere at the moment,” he said. “The market’s on edge.”