Hiring by American employers slowed slightly last month, yet still reflected a solid labor market despite the backdrop of economic uncertainty sparked by President Donald Trump’s trade policies. According to the Department of Labor, the U.S. economy added 139,000 jobs in May—a decrease from April’s revised figure of 147,000, but still surpassing economists’ forecast of 130,000.
Industries such as healthcare and hospitality drove the gains, with healthcare companies contributing 62,000 new positions and bars and restaurants adding 30,000. However, the federal government experienced a notable decline, cutting 22,000 jobs—its steepest reduction since November 2020—largely due to Trump’s implementation of job cuts and a hiring freeze. Manufacturing was also affected, losing 8,000 positions over the month.
Wages continued to climb steadily, with average hourly earnings rising 0.4% from the previous month and up 3.9% compared to the same period last year—both slightly above expectations.
Nevertheless, there were indications that the labor market might be weakening. The Labor Department revised job figures for March and April, reducing previous estimates by a combined 95,000. Additionally, the labor force—comprising individuals who are either working or actively seeking work—contracted by 625,000 in May, marking the most significant decline since December 2023. The employment-to-population ratio also slipped to 59.7%, the lowest level recorded since January 2022.
Trump’s aggressive stance on trade—particularly the imposition of broad tariffs on imports—has introduced considerable uncertainty into the economic environment. Concerns are growing that his actions could edge the U.S. economy closer to a recession. However, these fears have yet to manifest clearly in key government economic indicators.
“The job market is still standing tall even as some of these headwinds start to blow,” noted Daniel Zhao, lead economist at job site Glassdoor. “But ultimately we’re all still waiting for the other shoe to drop. It’s still much too early for tariff impacts to be a significant drag on the economy.’’
Despite external shocks, the U.S. economy and labor market have proven surprisingly durable over recent years. In 2022 and 2023, the Federal Reserve raised its benchmark interest rate 11 times in an effort to combat inflation. These increases, which raised borrowing costs, were widely expected to induce a recession. That outcome, however, did not materialize.
Even so, data shows the labor market has lost momentum. Thus far in 2025, job growth has averaged under 124,000 positions per month. This represents a 26% decline from last year, a 43% drop compared to 2023, and a dramatic 67% fall from 2022.
These moderate job gains and a steady unemployment rate are expected to influence the Federal Reserve’s policy in the near term. The central bank has held its key short-term interest rate steady throughout 2025, after implementing three cuts in 2024. Most economists believe the Fed is unlikely to adjust rates again soon unless a significant deterioration in the job market forces its hand.
Fed Chair Jerome Powell, along with other central bank officials, has expressed concern that Trump’s tariffs could add to inflationary pressures later this year. If that occurs, the Fed may respond by raising rates. For now, though, stable hiring figures have kept that possibility at bay.
Investors anticipate the Fed will make just two interest rate cuts this year, with the first likely to happen in September. Jim Lebenthal, chief equity strategist at Cerity Partners, said, “They need to see the effects of the tariffs before they make any moves.” He was referring to the new wave of tariffs Trump imposed on April 2, which were then delayed until July 9. The legality of these tariffs is currently being contested in court.
Recent economic indicators have painted a mixed picture. Earlier this week, the Labor Department reported a surprising rise in job openings, which reached 7.4 million in April—generally a positive signal. However, the same report showed a slight increase in layoffs and a decrease in voluntary resignations, indicating workers are growing more cautious about leaving their jobs in search of better opportunities.
Data from the Institute for Supply Management revealed that both manufacturing and service sectors contracted in May, suggesting broader economic weakness. Furthermore, initial claims for unemployment benefits climbed last week to an eight-month high, although they remain relatively low in historical terms.
Overall, job creation is slowing. The average monthly gain of less than 124,000 positions so far this year represents a steep decline from previous years: down 26% from 2024, 43% from 2023, and a stark 67% from 2022.
Trump’s trade measures—and particularly the unpredictable nature of how they are introduced, suspended, or altered—have already had a destabilizing effect on economic planning and investment.
“Employers have been hoarding labor in the face of massive corrosive uncertainty,” said Carl Weinberg, chief economist at High Frequency Economics. “We believe firms have been reluctant to lay off workers until they saw the extent of the Trump tariffs. Now that the tariffs are out in the open, we believe most firms see the writing on the wall and will start workforce reductions right now.’’
One small business owner feeling the impact is Dave Heaton of Steel Horse Leather, a Brooklyn-based company that makes handmade leather bags. The company relies partly on imports from China for materials and manufacturing. According to Heaton, the shifting tariff landscape has made it extremely difficult to plan or operate smoothly.
Though not all the consequences of the tariffs are immediately visible in the labor statistics, experts warn the full effects may take time to ripple through the economy. For now, hiring remains resilient, but the road ahead is uncertain.
In summary, while job growth continues, it is evidently slowing. Industries such as healthcare and hospitality are still expanding, but sectors like government and manufacturing are contracting. Wage growth remains strong, but troubling signs—like a shrinking labor force and revised job figures—suggest that Trump’s trade policies may eventually take a toll. For now, economists and policymakers alike are in a wait-and-see mode, cautiously monitoring the evolving impact of tariffs on the broader U.S. economy.