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US job growth May 2025 slowed to 139,000 new jobs—well below trend levels—raising concerns over business confidence and policy clarity. The Labor Department’s latest report, released June 6, revealed that hiring continues to soften, even as wage growth stays steady. Economists believe the combination of trade policy confusion, immigration restrictions, and federal cutbacks is stalling expansion.
Why the Labor Force Shrunk in May 2025
While the unemployment rate stayed at 4.2%, more than 625,000 people exited the labor force entirely, pushing participation down to 62.4%. Analysts point to discouragement, economic uncertainty, and immigration policy changes that may be limiting both supply and demand in the labor market.
Economist Michael Gapen from Morgan Stanley noted, “Flows from employment to ‘not in the labor force’ spiked dramatically. Policy shifts are having a chilling effect, particularly among vulnerable groups.”
Which Sectors Added or Lost Jobs
Despite overall weakness, healthcare posted strong gains with 62,000 new positions. Restaurants and bars led a 48,000-job increase in leisure and hospitality. But federal employment fell by 22,000 jobs in May, and manufacturing lost 8,000—primarily in machinery.
Temporary help services, a forward-looking job indicator, declined by more than 20,000 roles. Retail hiring also dropped, indicating soft consumer demand.
What May 2025 Data Means for the Fed and the Economy
US job growth May 2025 data comes as the Federal Reserve prepares for its next meeting. Most analysts now expect the Fed to hold rates steady, at least through June. While average hourly wages rose 0.4% in May and are up 3.9% year-on-year, that strength may not offset rising concerns around hiring stagnation.
Sarah House, an economist at Wells Fargo, summarized the Fed’s dilemma: “The labor market hasn’t fallen off a cliff—but the cracks are visible.”
Final Word
The US job growth May 2025 report suggests that while the economy hasn’t contracted, employers are clearly cautious. With nearly 100,000 jobs revised out of the previous two months’ data, and participation falling, policymakers and businesses alike are likely to tread carefully heading into the second half of the year.
Credit: Reuters
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