Jobs report again surpasses forecasts, but revisions hurt

MANHATTAN (CN) — The U.S. labor market is showing cracks but has not yet crumbled, as the federal employment report shows 139,000 jobs added in May.

The report, released Friday morning by the U.S. Bureau of Labor Statistics, is still less growth compared to last month, when 177,000 jobs initially were reported added to the U.S. labor market, but it goes a bit beyond the 125,000 jobs anticipated by economists.

Perhaps more importantly, the unemployment rate has not moved from the 4.2% figure it’s been hovering since March. However, the last two employment reports were revised downward to shed a whopping 95,000 jobs from the labor pool: 65,000 jobs for March and 30,000 from last month’s report.

The agency noted that the April jobs report were revised down partly due to the administration of a New York state program that caused home health care workers to be included on social assistance company payrolls.

The jobs report “was not as good as it looks” given the revisions to the prior two months, Stephen Brown, deputy chief North America economist at Capital Economics, wrote in an investor’s note Friday morning. “Nevertheless, it shows that tariffs are having little negative impact.”

Among the sectors seeing the most movement were, once again, health care, government employment and the leisure and hospitality industry. Health care picked up 62,000 jobs last month, while the leisure and hospitality sector gained 48,000 jobs.

Government lost 22,000 jobs, adding to last month’s decline, though the number is likely higher. The jobs report notes government employees on paid leave or receiving ongoing severance are counted as employed.

On Wednesday, the ADP jobs report showed just a 37,000 increase in private sector employment, nearly all of which came from service-providing companies. The headline number was a huge disappointment to the 110,00 jobs most analysts predicted; it was the weakest seen in more than two years.

“After a strong start to the year, hiring is losing momentum,” said Nela Richardson, chief economist at the payroll company. “Pay growth, however, was little changed in May, holding at robust levels for both job-stayers and job-changers.”

The ADP report also shows a skewed labor market. The job gains also were concentrated among medium businesses, or those with 50 to 499 employees. Small and large companies saw declines in employment.

The change in annual pay was 4.5% for those staying at their jobs and 7% for those leaving their jobs. However, both rates are near the lowest they’ve been since after the Covid pandemic struck in 2020.

“The job market has downshifted in the second quarter,” said Bill Adams, chief economist at Comerica Bank. “Labor force growth will also be slower in 2025 due to less immigration, so less job growth is needed to hold the unemployment rate steady.”

Unemployment continues to rise at a slow clip, though it eclipsed expectations for the second consecutive week. On Thursday, the Labor Department’s weekly unemployment report showed initial claims rose to 247,000 for the week ending May 31. Continued claims continued to drop slightly, hitting 1.8 million, about where it was the same time last year.

Layoffs and quits in the labor market remain fairly stable, according to the BLS report known as the JOLTS report. The report, which lags an additional month behind other employment data, found that job openings increased slightly to 7.4 million in April after decreasing to 7.2 million in March.

“The labor market is returning to more normal levels despite the uncertainty within the macro outlook,” said Jeffrey Roach, chief economist at LPL Financial. “Underlying patterns in hirings and firings suggest the labor market is holding steady.”

However, under the hood of the JOLTS report several industries are showing greater migration. In leisure and hospitality, the job openings declined to the lowest they have been since January 2021, while federal and state government job openings hit the lowest point since February 2021.

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