We expect a gain of 125,000 jobs and a modest increase in the unemployment rate to 4.3% when the U.S. employment report for May is released on Friday.
Wages are likely to advance by 0.3%, which should translate to a 3.6% year-ago increase.
But we expect downward revisions to previous months’ jobs numbers, which may cause the change in total employment in March and April to increase by fewer than 100,000, which is level needed to keep employment conditions stable.
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From our perspective, that line of demarcation will most likely define the narrative around the labor market for the remainder of the year as businesses adjust hiring and investment in light of trade policy.
Based on the job openings data that was released on Tuesday, we anticipate that the major source of job growth will be in service-sector hiring albeit at a slower pace than the three-month average of 133,300.
In addition, health care and education will continue to provide a floor for job growth at or near the three-month average of 70,000.
We expect weakness in hospitality and leisure hiring because of a decline in the number of tourists—one can visibly observe it on the streets of New York—in addition to soft construction and manufacturing employment data, which should define the May jobs report.
Looking ahead, given the slowdown in shipping we are closely monitoring employment in trucking and warehousing, which has held up well.
Demand for trucking is a useful coincident indicator for aggregate demand in the economy. Through the week of June 1, contract truckloads increased by 0.9% in what is a volatile backdrop across transportation markets.
Spot truckloads through June 1 declined by 14% while flatbed rates increased by 1.8% linked to seasonal demand around the spring construction season.
Trucking jobs are down modestly from a peak of 1.587 million in 2022 to 1.524 million, or roughly 63,200 jobs lost over the past three years.
While we think it is still too soon for the jobs report to capture the adverse impact of trade policy—that impact will show up in the employment reports for July and August—the overall cooling trend suggests that employment and wage growth will be insufficient to completely absorb that impact. It’s similar to the slowdown in growth in 2022-23, when too many prematurely called a recession.
The problem right now is that we just do not see monthly labor flows and churn as sufficiently strong to absorb any increase in layoffs linked to government downsizing and trade-related disruptions to transportation, warehousing and retail.
