The latest Bureau of Labor Statistics (BLS) jobs report finds the labor market was remarkably resilient in May, a welcome sign during a period of high tension and uncertainty. Given the amount of bleak economic news in recent weeks, including negative U.S. GDP growth in Q1 2025, extremely low consumer sentiment, widespread policy uncertainty, and a May 2025 ADP jobs report indicating weaker private-sector employment growth, expectations for total nonfarm payroll gains were muted.
Although the BLS jobs report included some red flags, including significant downward revisions for employment gains in April and March, the U.S. labor market continues to be a relative bright spot in a highly uncertain economic environment.
Modest Employment Growth
Total nonfarm employment increased by 139,000 jobs in May 2025, slightly above consensus estimates of 130,000. Monthly total nonfarm payroll gains have averaged 144,000 during the last 12 months, following downward revisions in the March and April 2025 data. The new report indicates continued employment growth, albeit at a much slower pace relative to recent years. Such resilience continues to defy expectations of a much weaker labor market, given growing concerns and evidence of an economic slowdown in the near future.
Although overall employment growth narrowly beat analysts’ expectations, gains were not evenly divided across industries. Total nonfarm employment grew in 14 out of 21 major industries, with job gains in health care and social assistance (+78,300 combined) continuing to drive overall employment growth across major industries. Entering the summer vacation season, there were notable job gains across leisure and hospitality: Employment trended up significantly in arts, entertainment, and recreation (+16,600) and accommodation and food services (+31,400), a welcome relief amid tepid consumer sentiment.
Overall employment growth appears to have slowed down, however, and several sectors experienced significant declines between April and May. For the first time this year, overall employment in government fell (-1,000), with federal employment declining by 22,000 jobs last month (bringing total losses in this sector since January to 59,000). Employment in administrative and support services declined by 21,900 positions in May, after gaining 7,700 jobs in April. Job gains declined significantly across trade-dependent sectors, as organizations struggled to keep up with the shifting regulatory environment and wait for clarity on trade policy changes. For instance, employment fell in nondurable goods manufacturing (-1,000), retail trade (-6,500), and durable goods manufacturing (-7,000).
Unemployment Rate Holds
Despite concerns that labor underutilization rates would increase, both the U3 (i.e., the traditional unemployment rate) and the U6 rates held steady at 4.2% and 7.8%, respectively. Both numbers are elevated relative to the exceptionally low rates of the pandemic era but are still low by historical standards and indicative of a healthy labor market. However, the latest jobs report does not capture recent indicators suggesting that initial unemployment insurance claims increased significantly during the last two weeks of May, due to the timing of the survey. This weekly claims data is notoriously noisy; even so, this will be a number to watch carefully in the months ahead.
The U3 rate tracks the share of labor force participants who are jobless but able to work and actively seeking employment. The U6 rate includes people who are marginally attached to the workforce and those working part-time for economic reasons (in addition to the set of unemployed people captured in the U3 rate).
Wage Growth Ticks Up
The growth rate in year-over-year average hourly earnings ticked up for the first time this year, after gradually falling for the first four months of 2025. BLS data shows year-over-year growth in average hourly earnings increased to 3.9% in May, above consensus expectations. This reinforces the BLS’ recently released Productivity and Costs Q1 2025 report, which showed nonfarm business unit labor costs increased 6.6% in Q1. Given the potential inflationary impacts of new fiscal and trade policies, employers concerned about rising labor costs should continue evaluating their compensation strategies.
Labor Shortage Persists
Month-to-month job openings have fallen steadily since the start of 2025, amid a softening labor market and broader economic uncertainty. However, in April, job openings increased by 191,000 and the unemployed-per-job-opening ratio (UJOR) ticked down slightly, although the officially reported value (which is rounded to the nearest tenth) remained at 1. A deeper dive into the data reveals there were 225,000 more job openings than unemployed people in April, resulting in an unrounded UJOR value of 0.97.
The UJOR is the ratio of the unemployed population (i.e., people without a job who are able to work and actively looking for employment) to the number of open jobs at a given point in time. When the value of this ratio is below 1, it means that even if every unemployed person could be immediately matched to an open job, there would still be unfilled positions at the end of this matching process. These conditions necessarily indicate a labor shortage in the overall labor market, though it is worth noting that other labor market frictions (e.g., skills mismatches between job seekers and open positions) can create a labor shortage even when the UJOR is above 1.
What Do These Findings Mean for You?
The latest BLS jobs report suggests the labor market continues to be resilient in the face of strong economic headwinds, though the future remains highly uncertain. Employment growth in certain sectors (especially healthcare and social assistance) remains exceptionally strong, though other areas (e.g., administrative and support services) have shown consistent weakness. It is likely that this uneven performance across sectors will continue, especially as the magnitude and economic impact of federal employment cuts, spending cuts, and policy changes come into sharper focus. Today’s report is unlikely to substantively affect the Federal Reserve Board’s stance on monetary policy, which continues to be highly cautious, due to policy uncertainty surrounding tariffs and the potential impact of those policies on future inflation.
Sydney Ross is an economic researcher at SHRM.
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