The labor market added 139,000 jobs and the unemployment rate stayed at 4.2% in May 2025, according to the latest release from the Bureau of Labor Statistics. Those top line numbers indicate a resilient labor market. Hiring seems to continue apace, even though widespread economic policy uncertainty has clouded planning for many businesses. But, there are also signs, especially a drop in the labor force, that a slowdown may be under way.
The latest labor market data show several positive signs. The labor market has continuously added jobs for 53 months now, starting in January 2021. And, the unemployment rate has stayed at or below 4.2% since November 2021, even as the Federal Reserve hit the brakes by raising its key interest rate, meant to slow hiring. Moreover, monthly wage growth has accelerated from 0.2% in March to 0.3% in April and to 0.4% in May 2025. All of these data points show a labor market that has held steady amid the turmoil brought on by President Donald Trump’s chaotic approach to economic policy.
There are signs, though, that things may be slowing more than the overall numbers suggest, although no single month makes a trend. For instance, federal government employment has fallen by 59,000 jobs since January. Many federal government employees live sort of in a limbo, with some being laid off but those layoffs being stopped by the courts, others being recalled, and even others having accepted retirements later this year. As several of these things unwind, federal government unemployment could further decline.
Manufacturing could become another trouble spot. Total manufacturing employment was 88,000 jobs lower than in May 2024 – the last month of peak employment in this sector. Jobs in that sector dropped by another 8,000 in May. Most of those job losses – 7,000 – happened in durable goods manufacturing, particularly machinery equipment. As Trump’s tariff chaos continues, many manufacturing firms will likely delay or completely hold off expansion plans. They may have to pay more for inputs such as steel, which just saw its tariff rate increase to 50%, and they may face retaliatory tariffs for their exports.
Further, the latest jobs market release revised the prior two months downward. There were 65,000 fewer jobs added in March and 30,000 fewer jobs created in April 2025 than previously reported. The March data had already been revised downward by 43,000 in April 2025. That is, there are now 108,000 fewer jobs than were initially reported for March 2025. The estimate of new jobs for March thus has been almost cut in half from 228,000 to 120,000. The downward revisions of prior labor market estimates have now happened for a three months, after the monthly data releases revised jobs numbers upward from November 2024 to February 2025. That is, for four months, the BLS reported a stronger than previously estimated labor market, while the opposite has been true since then.
The latest labor market data also show that many people left the labor market, including many unemployed workers. The household survey, which allows for the calculation of the unemployment rate, shows a drop in the labor force by 625,000 people in May 2025. At the same time, employment in the household survey fell by 696,000 people. This was the largest single month drop since December 2023 for both the total labor force and number of people with jobs. The rest became unemployed, lowering long term unemployment for the first time since January 2025. The unemployment rate stayed steady because people left the labor force all together, not because more people found jobs.
The latest jobs market data shows an economy in a holding pattern. Job growth has moderated, but remains positive. On the other hand, hundreds of thousands of people left the labor force last month, possibly because they were becoming frustrated with not finding new jobs. The economy seems still resilient for now, but trouble spots are emerging.
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