In May, the U.S. labor market came to a grinding halt on new hiring. Today’s job report from the U.S. Bureau of Labor Statistics showed the addition of just 139,000 jobs. This figure is well under the average monthly gain of 149,000 jobs that we’ve experienced over the last year. Beyond that, it is a dramatic decrease from last month’s 177,000 job increase. Though the rate of job growth is still strong, economists are already looking to recent and proposed trade policies to understand how they affect job trends.
Of those, the federal government sector was the most heavily impacted, with a loss of 22,000 jobs just in the month of May. Cumulatively, employment in the federal government has dropped by 59,000 jobs since January, indicating a troubling trend in public sector employment. Given these losses, net change overall unemployment held steady at 4.2%, still at a low rate by historical standards.
Yet the ongoing uncertainty created by President Donald Trump’s tariff policies still hangs heavily over the job market. In late May, the U.S. and China negotiated an agreement to roll back some of the tit-for-tat tariffs. This step has positively impacted the mood among investors in a big way. The stock market went crazy right after the announcement, an indicator showing that investor optimism was back. The recently implemented across-the-board 10% tariff on almost all imports—aside from semiconductors and pharmaceuticals—further muddies the economic waters. At the same time, China is still subject to punitive tariffs up to 30%.
Meanwhile, inflation rates have begun cooling off, falling to their lowest levels since 2021. This advance is particularly important as consumer spending makes up about two-thirds of U.S. economic activity. Consistent inflation can provide some comfort to consumers. This support motivates ongoing spending, the lifeblood of manufacturing economic expansion, which is incredibly important right now.
In January, President Trump established the Department of Government Efficiency (DOGE), aiming to streamline government operations and potentially mitigate job losses in the federal sector. He has cut down on certain tariffs that have been aimed at automotive imports. He similarly repealed tariffs on a wide range of products imported from Mexico and Canada.
As policymakers assess the effects of these trade agreements and tariff adjustments, they remain vigilant about their implications for job growth and economic stability. The labor market and trade policies are producing contradictory signals. Future of work Some industries are better prepared to succeed, and some will be more plagued by a cloud of unknowns.
