U.S. Job Growth Beats Forecasts in May as Wages Rise and Tariff Fears Loom

Hiring in the U.S. slowed only slightly in May, signaling resilience in the labor market despite growing concerns over tariffs and a slowing economy. According to the Bureau of Labor Statistics, nonfarm payrolls increased by 139,000, exceeding the Dow Jones estimate of 125,000 but falling short of April’s downwardly revised 147,000. The unemployment rate remained unchanged at 4.2%, with a broader measure of underemployment holding at 7.8%.

Wages Beat Expectations as Key Sectors Grow, But Labor Market Shows Mixed Signals

Average hourly earnings surpassed forecasts, rising by 0.4% for the month and 3.9% year-over-year, compared to expectations of 0.3% and 3.7%. Sectors driving job growth included health care, which added 62,000 jobs—well above its 12-month average—alongside leisure and hospitality (48,000) and social assistance (16,000). Meanwhile, government employment shrank by 22,000 jobs, partly due to initiatives by the Trump administration and the Department of Government Efficiency led by Elon Musk.

Following the report, stock market futures and Treasury yields rose, indicating investor optimism. However, revisions to past job data hinted at underlying weakness: April’s employment figures were reduced by 30,000, and March’s by 65,000. Moreover, the household survey showed a significant decline of 696,000 workers, including a sharp drop in full-time employment. These discrepancies raise questions about the labor market’s stability.

Trade Tensions, Tariff Risks Fuel Economic Anxiety Despite Steady Job Market Growth

While the May jobs report shows continued strength, economists warn of potential trouble ahead. With ongoing trade tensions and tariffs from the Trump administration, businesses and consumers remain cautious. Sentiment surveys suggest increasing anxiety over how these trade policies may suppress economic activity and drive inflation, despite no immediate signs of a recession.

The Federal Reserve is closely monitoring these developments ahead of its upcoming policy meeting. Though job growth remains solid, Fed officials are expected to keep interest rates steady as they weigh the risks of tariff-driven inflation. As the central bank enters its pre-meeting quiet period, economists suggest that Friday’s strong report will not shift the Fed’s measured and patient approach to monetary policy.