U.S. payrolls grew by 139,000 in May, a better-than-expected result in a closely watched jobs report that helps ease concerns — at least for now — about the potentially negative economic effects flowing from President Trump’s tariff policy.
The unemployment rate held steady at 4.2%, the Department of Labor reported, and worker pay grew at a higher-than-expected 0.4% rate on a monthly basis and 3.9% over the last year.
At the same time, previous monthly data were revised downward, indicating that growth has been a bit weaker than originally thought this spring. The job growth numbers for April and March were trimmed by 95,000, bringing the average growth rate down to 135,000 per month from March through May. The total labor force shrank, as well, and the prime-age participation rate fell by two-tenths of a percentage point.
Digging into the details, healthcare was the big winner, with the sector adding 62,000 jobs in May, higher than the 44,000 per month average over the last year. The leisure and hospitality sector added 48,000 jobs, and social assistance employment grew by 16,000.
On the other side of the ledger, employment in the federal government dropped again, by 22,000, and is now down 59,000 since January. As the report notes, “Employees on paid leave or receiving ongoing severance pay are counted as employed,” so many of the layoffs driven by the Trump administration’s DOGE cost-cutting initiative may still not be in the federal data.
Trump calls for rate cuts: While he celebrated the solid job growth numbers, the president also complained Friday morning about Federal Reserve chief Jerome Powell’s decision to leave interest rates unchanged in recent months. “‘Too Late’ at the Fed is a disaster!” Trump said on his social media platform, using his nickname for Powell. “Despite him, our Country is doing great. Go for a full point, Rocket Fuel!”
The jobs report, however, is unlikely to change minds at the Fed. The numbers provide no clear sense of how the economy may be shifting one way or another, and instead likely point to the Fed holding steady on interest rates until more decisive data comes in.
“I would rather wait and move quickly to play catch-up if I really don’t know what the right next move is,” Beth Hammack, president of the Federal Reserve Bank of Cleveland, said this week. “And right now, I really don’t know what the right next move is based on all of the information and policies that we’re responding to.”
What the experts are saying: Economists were relieved to see no signs of serious deterioration in the labor market but warned that problems could be brewing under the surface.
“A big relief to see a big nothingburger” of a report, said University of Michigan economist Justin Wolfers in comments on social media. “The economic expansion is still on, albeit at a somewhat slower rate.” However, Wolfers noted some signs of distress in the details of the report, saying the lower three-month growth average represents a “notable slowing” for the labor market.
Most experts agree that much depends on how Trump’s trade war and other policy moves play out. “Cracks in the façade of labor market resilience are now starting to show and the longer the tariff uncertainty and government spending cuts continue the worse the labor market reports are bound to be,” said Scott Anderson, chief U.S. economist at BMO Capital Markets.
Carl Weinberg, chief economist at High Frequency Economics, said companies are making moves to prepare for what may be coming. “Employers have been ‘hoarding labor’ in the face of massive corrosive uncertainty,” he said, per Bloomberg. “It costs money to fire workers, and we believe firms have been reluctant to lay off workers until they saw the extent of the Trump tariffs.”