May continued to deliver mixed employment reports, but with the usual negative bias—confirming our view that labor market conditions are weakening in 2025.
On the positive side:
Nonfarm payrolls showed relatively strong growth, with total payrolls increasing by 139,000 and private sector payrolls by 140,000, both beating consensus estimates of 126,000 and 120,000, respectively.
Although reported with a one-month lag (and thus technically for April), unfilled job openings rose by 191,000 to a total of 7.391 million.
The ISM Services Employment Sub-Index returned to expansionary territory in May, beating consensus expectations that had anticipated continued contraction.
However, on the downside:
The ISM Manufacturing Employment Sub-Index remained well within contraction territory, though it showed slight improvement over April.
The ADP employment report showed a payroll increase well below expectations at only 37,000, coming in under 100,000 for the second consecutive month against a consensus estimate of 114,000.
The household survey component of the May employment report showed a decline in total employment of 696,000 and a rise of 71,000 in the number of unemployed individuals.
Weekly unemployment filings continued to deteriorate, with initial claims ending May at 248,000, and continuing claims rising above the critical 1.9 million mark (see Exhibit 1).
The nonfarm payroll report extended a worrying pattern observed throughout 2025: consistent downward revisions of previous monthly data.
The Bureau of Labor Statistics routinely revises each month’s employment report twice over the following two months, prior to the annual benchmark revision. As shown in Exhibit 2:
January was revised down twice, totaling a 32,000 decrease.
February saw total downward revisions of 49,000.
March was revised down by 108,000.
April has so far had a single downward revision of 30,000.
This results in total downward revisions of 219,000 jobs year-to-date—a substantial and meaningful decline.
The uncertainty surrounding trade wars, tariffs, geopolitical instability, and the direction of fiscal policy in Washington, D.C. is clearly manifesting in labor market dynamics. While the public sector disruptions (e.g., those tied to DOGE layoffs) may diminish, private sector hiring continues to soften amid elevated uncertainty.
Though businesses typically treat reductions in force (RIFs) as a last resort, the cumulative data suggests we may be approaching a point where such actions become unavoidable for many corporations.
Looking ahead, with all signs indicating that any prospective trade agreements are likely to feature significant tariffs, U.S. companies may be forced to choose between passing on higher costs to consumers or absorbing them via margin compression. Neither outcome bodes well for future labor market stability.
