WASHINGTON — The latest economic data indicates that U.S. employers began to slow their hiring pace last month but still managed to add a significant 139,000 jobs, amidst ongoing tensions from President Donald Trump’s trade policies. Despite this slowdown from an adjusted figure of 147,000 jobs in April, the numbers surpassed economists’ predictions which had estimated a rise of 130,000 positions.
The labor market saw healthcare companies inject 62,000 new jobs and bars and restaurants contributed 30,000 jobs. However, the federal workforce shrank by 22,000 jobs, recording the most substantial decline since November 2020 due to Trump’s job cuts and hiring freeze. The manufacturing sector also experienced setbacks, shedding 8,000 positions.
Wages also saw an upward trend with average hourly earnings increasing by 0.4% from April and by 3.9% over a year, slightly outperforming expectations. However, there were some signs of potential weakening in the job market. Revised figures by the Labor Department trimmed 95,000 jobs off the payroll figures for March and April. Additionally, the number of individuals who are either employed or actively seeking employment dropped by 625,000, marking the most significant decrease since December 2023. The employment rate slipped to 59.7%, representing the lowest point since January 2022.
The impact of Trump’s assertive and unpredictable trade measures, especially tariffs on imports, has cast doubt over the economic and labor market forecasts with concerns about a potential recession in the U.S. economy. Despite these concerns, such impacts have not yet been starkly reflected in the economic figures reported by the government.
“The job market remains resilient even as some of these challenges emerge,” commented Daniel Zhao, the lead economist at Glassdoor. “However, it is too early to gauge the full impact of tariffs on economic performance.”
Recent resilience in the U.S. economy and job market has been surprising. Despite predictions of a recession following the Federal Reserve’s elevation of benchmark interest rates 11 times over 2022 and 2023, a downturn did not materialize. Nevertheless, the rate of job creation has decelerated, with employers adding an average of less than 124,000 positions monthly this year, reflecting a reduction of 26% compared to last year, almost 43% below 2023, and a substantial 67% decrease from 2022.
Moderate job growth and stable unemployment rates are expected to keep the Federal Reserve from altering interest rates in the immediate months, according to experts. Following three interest rate reductions last year, the central bank has maintained its short-term interest rate steady this year.
Concerns have been voiced by Fed chair Jerome Powell and other policymakers regarding the possibility of Trump’s tariffs leading to inflation later in the year, potentially necessitating rate hikes. However, unless job market conditions deteriorate significantly, immediate rate cuts by the Fed remain unlikely.
Investors anticipate only two rate cuts from the Fed this year, beginning in September. According to Jim Lebenthal, chief equity strategist at Cerity Partners, the central bank is inclined to await the effects of tariffs, first imposed by Trump on April 2 and delayed until July 9, before making any definitive moves, considering ongoing court challenges to these duties.
“They will need to assess the tariffs’ implications before taking any actions,” stated Lebenthal.
Economic data released recently has presented mixed signals for the market. Notably, the U.S. job openings rose unexpectedly to 7.4 million in April, which on the surface seems promising, though there were increased layoffs and fewer job-seeker movements, suggesting declining confidence in securing better employment opportunities.
Furthermore, indices from the Institute for Supply Management highlighted contractions in both the manufacturing and services sectors last month. Unemployment benefit claims also reached the highest levels in eight months last week, although they remain low compared to historical norms.
There’s an evident slowdown in the job market, with U.S. employers adding less than 124,000 jobs monthly this year, declining 26% from the previous year, almost 43% from 2023, and substantially 67% compared to 2022.
The uncertainty and erratic implementation of tariffs under Trump’s administration have already affected the economy. “Amid immense uncertainty, companies have been cautious about laying off workers,” said Carl Weinberg, chief economist at High Frequency Economics. “But now, with the tariffs out in the open, many firms acknowledge the situation and might start reducing their workforce soon.”
Brooklyn-based Steel Horse Leather, a company creating handmade leather bags and relying on some materials and production from China, exemplifies the dilemma faced by small businesses. Owner Dave Heaton states the fluctuating tariff laws have made day-to-day operations challenging and stalled plans to expand his workforce of four. “With today’s unpredictability, hiring doesn’t top our priorities, regrettably,” Heaton remarked.
To deal with supply chain challenges, Heaton’s company has switched part of its freight from sea to air shipping to meet demand for fall and holiday seasons. To compensate for increased tariffs and shipping costs, Heaton has raised prices on certain products by 10% to 15%, marking his first price increase in three years.
“The biggest hurdle is the uncertainty,” Heaton commented. “It’s beyond the price increases— it’s about the inability to plan ahead as we did before.”