US Labor Market Holds But Fragility Deepens Amid Tariffs and Business Caution
Work News | New Stardom
Photo by Renan Kamikoga
The U.S. labor market continued to add jobs in May, but early signs of strain are emerging as businesses face mounting tariff uncertainty and policy shifts. Employers added 139,000 jobs last month, according to the Labor Department, slightly above expectations but down from April’s revised figure of 147,000. Unemployment held steady at 4.2%.
While job creation remains positive, underlying data point to growing weakness. The labor force shrank by 625,000 people in May, the sharpest monthly drop since late 2023, and March and April job gains were revised down by a combined 95,000. Job growth remains heavily concentrated in healthcare and hospitality, while federal employment and manufacturing posted losses.
Initial jobless claims also edged higher, reaching 247,000 for the week ending May 31 — the highest level in eight months. Though still historically low, the rise suggests companies may be adjusting hiring plans amid growing caution.
Economists point to President Trump’s ongoing tariff policies as a key factor weighing on business confidence. Shifting import duties and cuts to federal spending have left many companies hesitant to expand headcount or issue earnings guidance. The federal government shed 22,000 jobs in May, and job losses have extended into scientific research sectors as budget cuts ripple through agencies and private contractors.
Wages continued to rise in May, up 0.4% month-over-month and 3.9% year-over-year, providing some support to consumer spending. For now, the Federal Reserve is expected to hold interest rates steady, while monitoring whether current economic headwinds will trigger deeper labor market weakness later this year.
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