**cue ominous music**

Same old, same old 

Manufacturing data continue the downward trend that started last fall, which is nothing new at this point, but I mean not ideal. Manufacturing businesses grew at the slowest pace in two and half years (since the month before Trump was elected) in May because, ICYMI, we’re fighting with China. At least it seems like we’ve hit the pause button on the fight with Mexico.  

Moral of the story: The ISM Manufacturing index is only 2.1 points away from falling into contractionary territory. China and Mexico are two of our three largest trade partners, so it can’t be a surprise that the manufacturing sector is feeling a little blue. 

Mirror mirror on the wall, where are the jobs after all? 

Remember how the strong labor market has been keeping everything on track despite all the other economic data showing signs of weakness? The latest jobs report published on Friday morning indicated the US added only 75k new jobs in May, falling significantly short of economists’ expectations of 185k new jobs. The weakness was effectively across almost all sectors. On top of the weak numbers for May, the initial prints for April and March were also revised downward by 75k. 

Moral of the story: The pace of hiring has slowed – we’ve averaged 151k new jobs in the last three months compared to the 238k new jobs at the beginning of the year. However, unemployment remains at almost 50-year lows and I would need to see a few more months of similar employment data before I’m convinced the labor market is joining the forces sucking the wind out of the economy’s sails.  

To cut, or not to cut

The Fed’s strategy conference in Chicago this week included commentary from Chairman Powell indicating that the FOMC is watching the impact of the trade war on the US economy and will “act as appropriate to sustain the expansion.” After these comments, the lackluster jobs report has the market expecting the Fed to start cutting rates in the near future. The stock market was actually so excited about this that stocks somehow closed up on Friday despite the weak jobs report. 

Moral of the story: Getting excited about the Fed cutting rates is, excuse my bluntness here, pretty idiotic. Lower interest rates in a vacuum are conducive to growth but not when lower interest rates are spurred by declining manufacturing because of trade wars and slowing job growth and waning inflation (read: a weakening economy). At the top of my list of worries is the fact that the yield curve has now remained inverted for over ten days straight, which is basically a bat signal for a recession coming in a year. Hopefully Trump sees all this as a negative sign looking toward the election and makes progress on the China trade front pronto.