U.S. job growth slowed again in May, but the economy showed continued resilience in the face of President Donald Trump’s tariffs, adding 139,000 jobs as the unemployment rate held steady at 4.2%.
The Labor Department’s downward revision today to the April figure, from 177,000 jobs to 147,000, brought the April and May figures roughly in line, reflecting growth that remains moderate. The revised figure for March came down even more, falling by 65,000 to a new total of 120,000.
“The job report continues to show underlying strength in the labor market, which should be a helpful tailwind for boat sales this summer,” Chad Lyon, managing director, global inventory finance, at Wells Fargo, told Trade Only Today. “While consumer confidence showed some volatility earlier in the spring, it doesn’t appear to have translated into job losses.”
Lyon added that companies are seeing cautious consumers. “However, retail sales seem to be remaining on trend,” he said.
“We think the economy is holding steady despite uncertainty,” Ian Wyatt, director of economics at recreational marine lender Huntington Commercial Bank, told Trade Only Today. “As consumers see we are absorbing the shocks relatively well and equity markets rally, confidence should recover, and it could boost boat sales.”
Health care remained the economy’s prime job growth engine, adding 62,000 jobs in May — significantly above what the government said was its 12-month average gain of 44,000. Employment in leisure and hospitality businesses rose by 48,000, and social assistance employment added 16,000 jobs.
Employment changed little during the month in other major industries.
Federal government employment fell by 22,000 and is down by 59,000 since January, reflecting the job-cutting efforts of Elon Musk’s extra-governmental Department of Government Efficiency.
The Labor Department said the labor force participation rate — the measure of the population that is in the workforce — fell to 62.4% in May, matching the level from February, which was the lowest that the measure had been in two years.
The government also said workers’ hourly pay rose 15 cents, or 0.4%, to $36.24 in May. During the past 12 months, earnings have increased by 3.9%, slightly above the 12-month figure from March and April, and they continued to reflect pay gains that stay well above the current rate of inflation.
Consumer spending, however, did not rise much in April, the latest month for which data is available. The Commerce Department said spending increased only 0.2% after a 0.7% climb the month before that economists largely attributed to people making purchases, particularly big-ticket items, before Trump’s tariffs could have an effect on prices.
Wyatt agreed that companies seem to be avoiding layoffs as a response to price pressures from tariffs.
“When you look at the average layoff rate (new data just came out three days ago), it has been lower from 2022-25 than it was at any point from 2010-2019,” he said. “Part of what has happened in the job market is the tariffs are on goods, and most of the growth in the job market is in services. The sectors that are growing are simply less impacted by tariffs.”
The U.S. recreational marine industry has been concerned that Canada could decide to impose tariffs on imports of boats, as it did in 2018 during a trade dispute with Trump during his first administration.
Trump increased his steel and aluminum tariffs to 50% this week, hitting Canada hard, but Bloomberg reported Wednesday that Canadian Prime Minister Mark Carney said he was delaying any retaliatory moves because the two countries were engaged in “intensive” trade talks.
Bloomberg and Reuters reported Thursday that Trump and Carney are engaged in direct talks. Could the two leaders resolve their differences such that Canada does not retaliate with new tariffs?
“Given the administration’s volatility and tendency to flip-flop, it is hard to say, but the U.S. and Canada have consistently resolved trade issues before, and the bilateral relationship is important,” Tamara Kay, an expert on free trade agreements and labor movements and a professor of global affairs at the University of Notre Dame, told Trade Only Today.
“Another issue that’s gotten less attention is the fact that the United Steelworkers has unions in both the U.S. and Canada, and they are well-connected politically and support a Canadian exemption,” Kay added. “The United States-Mexico-Canada Agreement is also up for review soon, and that is another incentive to negotiate and resolve these issues. And keep in mind, these tariffs violate the current USMCA.”
If Carney decides to retaliate against Trump’s increased steel and aluminum tariffs, he has a range of options.
“Canada has been strategic in hitting red states to have the greatest impact,” Kay said. “Electricity is one likely target — and it is exported to some blue states.
“There are always trade winners and losers,” she added. “My work has focused on how free trade agreements since NAFTA have generally made workers the losers, and corporations (and often consumers) the winners. But now I think we’re seeing an intensification of certain industries becoming winners (steel) and others becoming losers (agriculture, construction). Consumers will also pay a heavy price.
“Not all tariffs are ‘bad’ — they can be used strategically to achieve certain aims,” Kay said. “Blanket tariffs and very high tariffs, however, can cause major economic issues. And as many have already said, the biggest problem is the administration’s vacillation, which causes uncertainty, making it hard for companies to plan for the near and far future.”
Lyon said he was not in a position to speculate about what may or may not happen with tariffs or how their effects will show up in the economy.
“What I can say is that businesses are preparing for tariffs, as they always have, and when new tariffs are enacted I believe businesses will be ready to handle that result from the possible tariffs to ensure their businesses run smoothly and have the least impact on their customers,” he said.
The Federal Reserve’s policymaking committee next meets June 17-18, and economists’ consensus opinion is that the central bank will hold its benchmark rate steady as it waits for more clarity on how Trump’s tariffs and other economic policies are affecting the economy.
“We expect the Fed will hold rates steady at the next meeting,” Wyatt said. “This report gave Fed members reason to delay the first rate cut. Job growth remains solid, which reduces the immediate pressure to cut, and average hourly earnings rose 0.4% month-on-month and 3.9% year-on-year — a level high enough that it could help keep inflation above target.
“Next week, the Bureau of Labor Statistics releases its core inflation metrics (CPI and PPI),” he added. “For the Fed to cut, it needs confidence core inflation is coming down to 2% and will stay down. A softer CPI report could give the Fed more confidence that we are closer to target. One reason inflation may come in low is rent growth is very low right now, and housing costs are about one-third of the CPI. There are good reasons to cut rates now. The narrow nature of the job growth partly reflects limited hiring in interest-rate-sensitive sectors like housing and finance.”
Lyon said that because the labor market data remains strong, he believes there is little incentive for the Fed to change its policy stance.
“Underlying inflation still hangs above many target rates, so despite some uncertainty in consumer confidence, the hard data in the jobs report would suggest a steady interest rate policy,” he says.
Ahead of Friday’s jobs report, the Labor Department said Tuesday in its monthly Job Openings and Labor Turnover Survey that vacancies nationally rose by 191,000, to 7.39 million, in April from a slightly upwardly revised 7.2 million in March.
The government said layoffs rose by 196,000 in the largest increase in nine months, to 1.79 million, and hiring rose by 169,000, to 5.6 million.
The number of vacancies per unemployed worker remained at a low 1.
“We will call this report another indication of stasis in U.S. companies in the face of tariff uncertainty,” Carl Weinberg, chief economist at High Frequency Economics, told Reuters. “Once companies are more certain that bad times are coming, they will start to shed workers.”
The ADP Research Institute said Wednesday in its National Employment Report for May that private sector employment rose by a net 37,000, which was the lowest total since March 2023.
The downward trend continued from April, when the gain was a somewhat less sluggish 62,000. In March, the private sector had added a far more robust 155,000 employees.
“After a strong start to the year, hiring is losing momentum,” Nela Richardson, ADP chief economist, says in a statement. “Pay growth, however, was little changed in May, holding at robust levels for both job-stayers and job-changers.”
Annual pay was up 4.5% for people who stayed in their current jobs. Among job-changers, the gain was 7%.
The institute said hiring at companies with 50 to 249 employees led May’s slim growth, with 51,000 newly employed. All other size categories showed declines, leaving the net number 14,000 lower than that.
The Midwest and West combined for a gain of 57,000 hirings. Declines in other parts of the country similarly dragged the overall number downward.
