This week, ADP estimated that private sector employment increased by only 27,000 in May. The Bureau of Labor Statistics (BLS) will release their estimates of May job growth this Friday morning, and the extremely slow pace of hiring reported by ADP will have many people paying attention. The obvious question following the ADP numbers is just how worried should we be that a substantial economic slowdown is upon us?

While any single monthly data indicator should be taken with a large grain of salt, there are some real signs that the economy may be slowing a bit. The weak ADP report isn’t the first big hiccup in employment estimates in recent months. The BLS estimated just 56,000 jobs were created in February (46,000 for the private sector). The last three months of payroll employment showed an average increase of only 169,000 (154,000 private) compared to a much stronger 245,000 (240,000 private) in the previous three months.

EPI’s nominal wage tracker shows a distinct leveling off as well in very recent months. After pretty sharp and steady improvements in year-over-year wage growth between 2017 and 2018, wage growth gains seem to have tapered off. On average, wages grew 2.6 percent in both 2016 and 2017. In 2018, they grew an average of 3.0 percent over the year. Wages continued to rise in the latter half of 2018, and averaged 3.3 percent in the last quarter of the year. Wage growth has remained at 3.3 percent for the first four months of this year. In a stronger economy wage growth would be above 3.5 percent and if the recovery continues on course, I expect we will get there. To be at genuine full employment, wage growth would have to be at least 3.5 percent for a consistent period of time to allow labor share of corporate sector income to recover.

Another concerning sign in the monthly jobs numbers is the recent rise in the black unemployment rate. Given relatively small sample sizes and data volatility, I try to not to make a huge deal about any month-to-month trend and the figure below smooths out some of the volatility using a three-month moving average. When the black unemployment rate started rising in December 2018, there was a good chance it was a blip. Now that it hasn’t gone back down and hasn’t continued to close the gap with the white unemployment rate, it’s beginning to look troublesome. Black unemployment hit a low of 5.9 percent in this business cycle back in May 2018 and has exhibited relatively normal fluctuations in the ensuing months. It rose from 6.0 percent in November to 6.6 percent in December, then again to 6.8 percent in January and 7.0 percent in February. The black unemployment rate hasn’t been above 7.0 percent in over a year. It fell slightly back to 6.7 percent in March and stayed put in April. Given the last six months, particularly as white unemployment has continued to hold steady—or fall—black unemployment remains a troublesome indicator to watch in the upcoming jobs report.

Taken together, this begs the question of not only what is going on in the economy that’s disproportionately affecting black workers, but also what’s causing the slowdown generally. The first is very concerning given that what typically has happened historically in tighter labor markets is disproportionate improvement not weakness among historically disadvantaged groups. To answer the second question, it’s important to take a look at changes in policy over the last couple of years.

If we look at fiscal policy, after years of austerity, there was a significant boost in spending in 2018 to the tune of $140 billion. As that fiscal stimulus fades away, we should see a slowdown in the rate of GDP growth. Further, when we look at monetary policy, the Federal Reserve has rightfully held off raising rates this year so far, but did raise rates in seven out of eight potentially rate-raising meetings over 2017 and 2018. The ADP weakness discussed in their report was disproportionately in construction and residential investment, two sectors that have contracted in the last two years, exactly the sectors you’d expect to first feel the effect of interest rate tightening. If the economy continues to chug along, the labor market has a real chance to hit genuine full employment. If these hiccups persist, the weakness predicted may continue denying millions of workers the strong wage growth they’ve been waiting for.