U.S. employers are thought to have hired at a solid pace in May and helped extend the economy’s nearly nine-year expansion, the second-longest on record, despite uncertainty caused by trade disputes.

Economists have forecast that employers added 190,000 jobs last month and that the unemployment rate remained at a 17-year low of 3.9 percent, according to data provider FactSet.

The Labor Department’s May jobs report will be released at 8:30 a.m. EDT Friday.

Economy firm footing

Solid hiring data would coincide with other evidence that the economy is on firm footing after a brief slowdown in the first three months of the year. The economy grew at a modest 2.2 percent annual rate in the January-March quarter, after three quarters that had averaged roughly 3 percent annually.

Some economists remain concerned that the Trump administration’s aggressive actions on trade could hamper growth. The administration on Thursday imposed tariffs on steel and aluminum imports from key allies in Europe, Canada and Mexico. Earlier in the week, it threatened to hit China with tariffs on $50 billion of its goods.

Still, while Trump has made such threats since March, most employers so far haven’t suspended hiring.

​Consumer spending up

And consumers have started to spend more freely, after having pulled back in the January-March quarter. That gain could reflect in part the effect of the Trump administration’s tax cuts, which might be encouraging more Americans to step up spending. Consumer spending rose in April at its fastest pace in five months.

Some of the spending reflects more money needed to pay higher gas prices, a potential trouble spot for consumers in the coming months. The average price of a gallon of gas nationwide reached $2.96 on Thursday, up 15 cents from a month ago, according to AAA. Some economists calculate that higher gas costs could offset up to one-third of the benefit of the tax cuts.

More hiring, more growth

Companies are spending more on industrial machinery, computers and software, signs that they’re optimistic enough about future growth to expand their capacity. A measure of business investment rose in the first quarter by the most in 3½ years. That investment growth has been spurred partly by higher oil prices, which have encouraged the construction of more drilling rigs.

Manufacturers have benefited from the healthier business spending and have increased hiring. In April, factories expanded production of turbines and other heavy machinery by the most in seven months.

Macroeconomic Advisers, a forecasting firm, said Thursday that it now foresees the economy expanding at a robust 4 percent annual pace in the April-June quarter, which would be the fastest in nearly four years. That is up from its forecast last week of less than a 3 percent rate for the current quarter.

Wage growth lagging

Yet even with unemployment at a 17-year low, wage growth has been chronically sluggish in most industries, leaving many Americans still struggling to pay bills, particularly as inflation has ticked up.

Average hourly pay rose just 2.6 percent in April from a year earlier, before adjusting for inflation. That’s far below historic trends: Paychecks were rising at roughly a 4 percent pace in 2000, the last time unemployment was this low.

Still, companies are starting to pay more to lure workers from other companies, a trend that could lead to broader pay gains in coming months. Workers who switched jobs received annual pay increases averaging 4 percent in April, compared with average gains of 2.9 percent for those who stayed in their jobs, according to data compiled by the Federal Reserve Bank of Atlanta.

Mark Zandi, chief economist at Moody’s Analytics, said higher pay for job-switchers tends to augur more robust raises for everyone else.

“Employers will have no choice but to adjust their pay scales to ensure wage parity across their entire workforce,” Zandi said.

At the same time, Martha Gimbel, head of economic research at the job listing site Indeed, notes that wages for people who remain in their jobs have actually declined in recent months. That suggests that many employers have yet to worry about their workers being lured away.
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The United States’ allies in the G-7 vowed Thursday to push back against Washington’s decision to impose tariffs on their steel and aluminum exports, saying as they gathered for a meeting that the move threatens global growth.

The escalating trade conflict between the United States and many key allies will dominate the three-day meeting in Canada of financial leaders from the Group of Seven industrialized nations that began Thursday, with U.S. Treasury Secretary Steven Mnuchin the top target for their complaints and lobbying.

The United States said it was moving ahead to impose tariffs of 25 percent on steel imports and 10 percent on aluminum, starting at midnight (0400 GMT Friday), ending months of uncertainty about potential exemptions and sending a chill through financial markets.

French Finance Minister Bruno Le Maire demanded a “permanent and total exemption” from the tariffs and said that European Union countries would respond with their own measures.

The U.S. tariff decision “is unjustified and unjustifiable and will have dangerous consequences for global growth,” Le Maire said in comments to media on his way to the meeting of policymakers from the United States, Britain, Germany, France, Italy, Japan and Canada in the mountain resort of Whistler, British Columbia.

His German counterpart, Olaf Scholz, said EU member states would show their unity and sovereignty by acting in a determined way. “Our response should be clear, strong and smart,” Scholz told Reuters.

Canadian Finance Minister Bill Morneau said the tariffs would color the G-7 meeting.

“There will be some challenging discussions I’m sure,” Morneau told a news conference as top policymakers gathered. “We are not saying there won’t be frictions,” he added. “We’re not saying we won’t have strong words. We’re not saying we won’t be able to send messages.”

Mnuchin, who was not at the introductory discussion panels focused on development and sharing the benefits of global growth, is scheduled to meet individually with many of his global counterparts during the three-day meeting.

Bank of England Governor Mark Carney said the U.S. decision to target trade in goods, not services, was misplaced.

“This focus on goods trade, bilateral goods, is not the right focus in a hyperconnected world where most of the economic activity, most people work, most small businesses, most women work in the service sector,” Carney told a panel.

“If we were to liberalize services to the same degree as we have liberalized [trade in] goods, these balances would be cut in half for the United States and for the U.K.,” Carney added.

International Monetary Fund Managing Director Christine Lagarde said if trade was “massively disrupted,” the level of public trust in leaders would be severely damaged.

“First of all, those who will suffer most are the poorest, the less privileged people, those who actually rely on imported goods to have their living,” she said, adding that long-standing supply chains also would be disrupted.

The U.S. actions on trade policy, which also include potential tariffs and investment restrictions on China and a national security probe that could lead to tariffs on auto imports, are expected to also dominate the G-7 summit of world leaders in Quebec next week. 
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