Clear Signs of a Slowing Labor Sector

The most recent jobs data indicates a noticeable slowdown in the labor market, prompting a closer look as we approach the Federal Reserve's meeting on June 18 and their monetary policy decision.

According to the Bureau of Labor Statistics, May’s Jobs Report shows an addition of 139,000 jobs, slightly surpassing the expected figure of 130,000. However, a deeper examination of the data uncovers some troubling trends.

These preliminary numbers are often subject to revisions in the following months. For instance, the job figures for the first four months of 2025 were all significantly revised downward (January: -32K, February: -49K, March: -108K, April: -30K). If May’s figures undergo similar revisions, actual job growth could fall short of current expectations.

Meanwhile, the private sector struggled in May, with ADP reporting a mere 37,000 new jobs – well below the anticipated 115,000. This marks the slowest hiring pace since March 2023, suggesting that economic uncertainty may be influencing employers' hiring decisions.

Dr. Nela Richardson, Chief Economist at ADP, noted, “After a strong start to the year, hiring is losing momentum.” To provide context, the three-month average job gain is now at 81,000, a decline from the six-month average of 115,000 and the twelve-month average of 139,000, clearly highlighting a downward trend in hiring.

Unemployment figures and reported job cuts further reinforce the signs of weakness within the sector. Recent data shows that initial jobless claims have risen to their highest level since October, and continuing unemployment claims have exceeded 1.9 million for the third time in six weeks.

Additionally, a report from Challenger, Gray & Christmas indicates that job cut announcements in May surged nearly 50% compared to the same month last year. Notably, job cut announcements for the first five months of this year are 80% higher than in the same timeframe in 2024.

Will the Fed Maintain Its Cautious Approach?

In their May meeting, Fed members unanimously decided to keep the benchmark Federal Funds Rate in the range of 4.25% to 4.5%, maintaining the pause that began in January. This decision was widely anticipated given the Fed's recognition of heightened risks related to both inflation and unemployment.

Fed Chair Jerome Powell emphasized a cautious approach during his post-meeting press conference, particularly in light of uncertain trade policy impacts. Looking ahead to the upcoming June 18 meeting and monetary policy decision, there is nearly a 100% chance that the Fed will choose to maintain the current Fed Funds Rate range.

While the Fed is committed to its dual mandate of price stability and maximum employment, these goals may influence policy in opposing ways. New tariffs create economic uncertainty, as higher inflation can hinder rate cuts, while economic slowdowns typically trigger them. Future policy decisions will likely depend on which risks materialize first.

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By Shelly Williams