The U.S. job market saw a modest slowdown in hiring during May, reflecting growing uncertainty among businesses over President Donald Trump’s fluctuating tariff policies. Despite solid underlying economic indicators, the pace of job creation cooled, with many companies pausing expansion plans amid ongoing global trade tensions.
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According to the latest data from the U.S. Bureau of Labor Statistics, employers added 139,000 jobs in May—a decline from the 177,000 jobs added in April, but still above economist forecasts. The unemployment rate held steady at a historically low 4.2%, signaling ongoing strength in the labor market even as caution tempers momentum.
Hiring Slows Amid Trade Uncertainty
May’s job gains, while slightly below the 12-month average of 149,000, underscore the resilience of the U.S. economy. However, the uncertainty surrounding international trade policy—particularly tariffs—has made businesses hesitant.
Volatile tariff strategies, especially concerning China and other major trading partners, have led companies to adopt a wait-and-see approach. Many firms remain wary of how potential import costs could affect profitability, hiring plans, and long-term investments.
Federal Government Job Cuts Continue
Federal employment fell by 22,000 jobs in May, part of a cumulative 59,000 federal jobs lost since January. The cuts are largely attributed to the administration’s Department of Government Innovation (DGI) initiative, a Trump-era policy aimed at streamlining operations and reducing government spending. These reductions in the federal workforce have added a layer of uncertainty to the broader employment landscape, particularly in regions reliant on government jobs.
Trade Deals Bring Temporary Relief
On the international front, a significant development came in May with a new U.S.-China trade agreement. The deal included mutual tariff reductions and temporarily eased tensions between the world’s two largest economies. Wall Street responded positively, and investor confidence rose amid hopes that the agreement might stabilize global supply chains.
Adding to the optimism, President Trump rescinded many previously imposed tariffs—referred to as the administration’s “Liberation Day Tariffs.” These included reductions on imports from Mexico, Canada, and certain sectors such as automobiles. However, a 10% universal tariff still applies to most imports, excluding select goods like semiconductors and pharmaceuticals. In addition, steel, aluminum, and automobile-specific tariffs remain in place.
Despite these moves, China continues to face a hefty 30% tariff on exports to the U.S., maintaining a complex and strained trading relationship.
Business Concerns Mount
Major corporations such as Walmart, Best Buy, Pepsi, and Goldman Sachs have raised concerns about the financial strain caused by persistent trade uncertainty. Retailers in particular fear that increased import costs will be passed on to consumers, potentially weakening consumer spending, which drives nearly two-thirds of U.S. economic activity.
If household spending slows, businesses may be forced to cut jobs or scale back hiring in tariff-sensitive sectors. This could further temper the pace of job growth moving into the second half of 2025.
Resilience Amid Headwinds
Despite these challenges, several key indicators paint a promising picture. Inflation has cooled to its lowest level since 2021, and the labor market remains tight. These signs of stability have helped to deflect some recession fears, at least in the short term.
In its recent report, the Organization for Economic Cooperation and Development (OECD) projected that the U.S. economy will continue to grow in 2025 and 2026, albeit at a slower pace. The forecast reflects a more cautious environment where businesses and consumers remain sensitive to geopolitical tensions and trade developments.
Looking Ahead
The direction of the U.S. economy in the coming months will hinge largely on evolving trade policies and negotiations. Businesses are expected to closely monitor upcoming talks and adjust their strategies accordingly.
For now, the job market remains resilient. However, the slowdown in hiring—paired with persistent concerns around tariffs and international trade—signals a more cautious economic outlook ahead.
As companies continue to balance hiring decisions with uncertain global market conditions, the U.S. economy’s long-term trajectory will depend on sustained domestic strength and the resolution of international trade disputes.