The United States added 139,000 jobs in May, more than expected but pointing to a labor market that continues to slow.
The employment data released Friday by the Bureau of Labor Statistics exceeded forecasts for about 120,000 payroll gains but marked a decline from the revised 147,000 jobs added in April. The unemployment rate held steady at 4.2%, remaining near historic lows.
Stocks surged at Friday's open, with all three major indexes gaining about 1%. U.S. government borrowing costs climbed as investors anticipated the Federal Reserve would keep interest rates higher for longer, making it less attractive to hold U.S. debt.
The BLS report showed job losses in the federal government continued to pile up, with that sector shedding 22,000 roles in May alone. The federal workforce is down by 59,000 since January, largely due to sweeping cuts by the Trump administration and multibillionaire tech executive Elon Musk's Department of Government Efficiency project.
Even as the economy continued to add jobs at a relatively steady clip last month, the report showed other signs of a weakening labor market.
The ratio of employed workers to the total population fell to 59.7%, its lowest since the pandemic. An alternative measure of unemployment that includes "discouraged" workers, or those who have stopped looking for work, returned to a post-pandemic high of 4.5%.
But President Donald Trump cheered the numbers, posting on his Truth Social platform Friday morning: "AMERICA IS HOT! SIX MONTHS AGO IT WAS COLD AS ICE! BORDER IS CLOSED, PRICES ARE DOWN. WAGES ARE UP!"
In reality, employers added 212,000 jobs in November, unemployment was at 4.1%, the 12-month average of hourly pay gains have softened from nearly 4.2% then to 3.9% in May, and both the labor force participation rate and the employment-to-population ratio were slightly higher. Only consumer prices have meaningfully cooled, ticking down from an annual inflation rate of 2.7% in November to 2.3% in April, the latest month with available data.
Friday’s report points to “a labor market that is steady but cautious in the face of ongoing uncertainty,” analysts with ManpowerGroup, an employment agency, said in a note. “There are signs of deceleration with hiring momentum slowing across the board.”
Analysts at Capital Economics called the May jobs report "not as good as it looks." Still, they wrote in a note Friday, "it shows that tariffs are having little negative impact" and added that the Federal Reserve is likely to continue holding interest rates steady "while it assesses the effects of policy changes on the economy."
That would run counter to the unprecedented pressure campaign Trump has waged on Fed Chair Jerome Powell. For months, the president has both privately and publicly demanded that the central bank chief lower borrowing costs, leading Powell to repeatedly emphasize the Fed's independence.
This week brought other signals of a labor market slowdown.
On Wednesday the private payroll processor ADP reported the weakest monthly jobs total since March 2023. The firm's data has shown fewer jobs added in five of the past seven months. Separately, the Institute for Supply Management showed activity at U.S. service firms contracted unexpectedly last month for the first time in nearly a year, while hiring cooled.
And on Thursday, the Labor Department reported weekly jobless claims hit their highest level since October — while continuing unemployment claims remained elevated, indicating it's taking longer for out-of-work people to find a job.
“We’re throttling back, and the damage from the trade war is still coming,” Mark Zandi, chief economist at Moody’s Analytics, told NBC News ahead of Friday's BLS report.
Zandi said forthcoming inflation readings are likely to reflect businesses raising prices to offset Trump’s import taxes. Indeed, a Federal Reserve survey released Wednesday indicated “widespread reports” of companies “expecting costs and prices to rise at a faster rate going forward,” with higher tariffs “putting upward pressure on costs and prices.”
Separately, a Congressional Budget Office study now forecasts inflation will increase by an average of 0.4 percentage points in 2025 and 2026 as a result of Trump’s tariffs. As more prices rise, consumer dollars won’t go as far, Zandi said. That will likely lead to a feedback loop of reduced economic activity and reduced hiring.
As demand softens “more palpably,” he predicted, “we’ll start to see layoffs” — with BLS jobs data likely falling consistently below 100,000 in the coming months.
Already, firms are showing signs of holding back on investment and bringing on new workers. Earlier in the week, the BLS reported that the hiring rate remains stuck at levels last seen in 2014, when the U.S. economy was still emerging from the Great Recession.
