U.S. Employment (May 2025)

Payrolls rise 139k in May, unemployment rate holds at 4.2%

• The U.S. economy added 139k jobs in May, slightly above the consensus forecast of 125k. But revisions for the prior two months subtracted a meaningful 95k jobs.
  • Smoothing through the volatility, non-farm payrolls averaged 135k over the last three-months, only a touch lower than the 144k averaged over the twelve-month period.
• Private payrolls rose 140k – nearly matching April's downwardly revised gain of 147k (previously 167k) – with the largest gains seen in health care & social assistance (+78.3k) and leisure & hospitality (+48k). Trade exposed industries like manufacturing (-8k) and retail trade (-6.5k) both shed jobs. Federal hiring declined by 22k and has now lost 59k jobs since February.
• In the household survey, both civilian employment (-696k) and the labor force (-625k) plummeted, resulting in the unemployment rate holding steady at 4.2%. The labor force participation rate ticked down 0.2 percentage points to 62.4%.
• Average hourly earnings (AHE) rose 0.4% month-on-month (m/m) – following a gain of 0.2% m/m in April. On a twelve-month basis, AHE earnings are up 3.9%.
• Aggregate weekly hours rose 0.1% m/m, down from April's gain of 0.2% m/m.

Key Implications

• Non-farm payrolls remained resilient last month despite heightened trade policy uncertainty. While weakness in the household survey coupled with the significant downward revisions to prior months helped to take some of the shine off the headline payrolls print, it's fair to say that the labor market is holding up better than expected.
• Heightened uncertainty surrounding trade and fiscal policy alongside still elevated inflation has left policymakers in no rush to cut rates. While the labor market is showing signs of cooling, job creation is still running at a healthy pace and underscores the ongoing need for patience. Interest rate futures are currently pricing in just 20 bps of policy easing by September and only two quarter-point cuts by year-end.

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