Markets rise slightly despite iffy manufacturing, jobs data

MANHATTAN (CN) — Investors took what they could this week from employment and manufacturing data, plodding ahead with gains in equities even as cracks in the economy start to show.

The S&P 500 inched forward all week, finishing up 89 points by Friday’s closing bell to hit 6,000 points. The Dow Jones Industrial Average and Nasdaq similarly gained 488 points and 396 points for the week, respectively.

Economic data were mixed, with manufacturing and services surveys by the Institute of Supply Management showing faults in the economic facade. Overall, the ISM services report showed a slight decline to 49.9%, while the ISM manufacturing report fell to 48.7%.

In the services report, some sectors — including construction and technology — are being weighed down by tariffs. Others, like power generation, are being uplifted. The report also noted that overall volumes for the year are down on new orders.

For manufacturing, it was much worse, with economic activity contracting for the third consecutive month while new orders declined for the fourth straight month. According to one company surveyed by ISM, the “administration’s tariffs alone have created supply chain disruptions rivaling that of Covid-19.”

The labor market, too, is still relatively strong but slowing notably. The May employment report, released on Friday by the Bureau of Labor Statistics, showed another surprising gain of jobs —139,000 of them, to be exact — though revisions to the previous two reports eliminated 95,000 jobs from the total headline.

“The May jobs report was mediocre,” said Bill Adams, chief economist at Comerica Bank. “The headlines were decent, but the details were considerably worse.”

Besides the downward revisions, the labor participation rate also fell to 62.4% from 62.6% — the lowest it has been since the end of 2022. The number of Americans working part-time because they can’t find full-time work increased to 125,000, the most seen since April 2019.

The federal jobs report was refreshing compared to the dismal jobs report by payroll company ADP, which showed an increase of only 37,000 private sector jobs last month. Adams said job gains in some sectors “were anemic, reflecting the drag from policy uncertainty.”

Earlier in the week, the Federal Reserve’s latest Beige Book, which tracks economic conditions around the nation, noted the U.S. economy has contracted during the last six weeks.

It paints an uncertain economic picture. Half of the regions — mostly those in the Northeast — reported a decline in growth, while the remainder reported minimal or no growth. Lower labor demand also plagued many of the Fed’s regions, with “widespread” comments about uncertainty delaying hiring new employees.

Consumer spending also appeared muted in comments coming out of most Fed regions. Due to tariffs, some companies cited in the Beige Book say they are looking at “strategic price increases."

The Fed is taking in all the data and not bowing to President Trump’s demands for the central bank to cut interest rates. Due to the ongoing trade war. Fed officials have repeatedly referenced price and labor concerns.

“The U.S. economy is still on a firm footing, but uncertainty has notably increased since the beginning of the year,” Fed Governor Lisa Cook said in a speech to the Council on Foreign Relations earlier this week. “The ultimate level of tariffs remains unknown because policy changes are still developing. However, the effects are already noticeable.”

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