The May jobs report shows a labor market that’s still hanging on. But not without a few warning signs. Hiring’s slowing, workers are staying put, and AI and immigration are starting to shake things up.
Key Takeaways
- Hiring’s still happening, but with hesitation. The U.S. added 139,000 jobs in May, mostly in healthcare and hospitality. However, private sector growth was soft, and federal job cuts continue to drag down the totals.
- Immigration shifts and AI are changing the game. A drop in the foreign-born Hispanic workforce and rising use of AI tools are starting to reshape how companies hire, especially for frontline and hourly roles.
- Workers are motivated but worried. Employees are sticking with their current jobs, entry-level hiring is down significantly, and younger workers are feeling the pressure as confidence levels dip to new lows.
Resilient Yet Restrained Job Gains in May
The U.S. economy posted healthy employment gains in May, albeit with a notable slowdown, adding 139,000 jobs . All this among continued tariff uncertainty and further federal job losses. Experts say we are currently in the “wait” phase of the wait-and-see period, as employers and consumers collectively hold their breath for economic fallout, or maybe not? ADP reported a gain of 37,000 jobs in private U.S. employment, the lowest gain over the past couple of years.
Source: NPR.org
Unemployment remained at 4.2 percent, while jobless claims rose and hourly earnings for all employees rose by 0.3% in May. In terms of its impact on economic policy, the BLS released May’s Consumer Price Index measure at 2.8% for all items excluding food and energy. This represented a 0.1% month-over-month gain, and while inflation has remained moderate even amid headlines riddled with tariff uncertainty, it still sits above the Federal Reserve’s 2% target.
President Trump has continued to criticize the Fed for being too slow to act, with his expectation that they should have reduced rates by a whole point by now. However, instability created by the back-and-forth of tariff policies has created a difficult environment for the Fed and policymakers to implement sweeping changes just yet. Further, Trump has indicated he will announce his pick to succeed Jerome Powell soon, with the seat opening next May.
While all industries saw month-over-month declines in May, employment continued to trend up in healthcare (+62,200), leisure and hospitality (+48,000), and social assistance (+16,100). The federal government continued to lose jobs, with a total posted loss of 22,000 for the month. Overall, government employment has decreased by 2.5% since the DOGE cuts began, with an additional 10% planned.
Source: Revelio Labs
Workers are in Their “Stay Put” Era
Glassdoor reported another month of record-low employee confidence in May at 44.1% of workers expressing a positive 6-month business outlook for their organization (down from 45.8% in April). On the flipside, ADP’s Employee Motivation and Commitment Index posted a record high in May at 132. So how are workers both motivated and also lacking confidence?
With so much uncertainty in the labor market right now, employers are hitting the “proceed with caution” button on all things related to their workforce. Employers want to keep layoffs to a minimum, fearing the shed of too many roles too quickly, as well as the reputational backlash that accompanies such a move. And similarly, we see companies like Shopify making headlines for requiring hiring managers first to prove a job can’t be done by AI before approving a new headcount.
Any worker logging into LinkedIn right now will see job seeker POV posts littered with how challenging it is to search for a role right now, so many are holding on tight to what they’ve got to ride out this wave.
For employers, now is the time to focus on connecting your employer brand promise to the lived experience at your organization. Leaning into company culture, connection, innovation, and retention will pay dividends in the not-so-distant future.
Source: ADP Research
The First Signs of Immigration Impacts
While the headlines about ICE raids and immigration crackdowns across the U.S. continue, we are starting to see some of the first signs of this impact on BLS numbers. For the first time since 2019, there has been a decline in the foreign-born Hispanic labor force. There was significant growth in this labor population in the wake of the pandemic as direct-border immigration policy eased, in support of urgently filling gaps in the labor force. Immigrant labor was a major driving factor in the U.S.’s relatively swift economic recovery from the pandemic-era recession.
And as Gad Levanon, the Chief Economist at The Burning Glass Institute, points out, several factors surrounding this trend are driving both tightening and loosening in the labor market. First, the direct impacts of limited immigrant labor, both documented and undocumented, will have immediate impacts on the supply of labor for employers in healthcare, leisure, and hospitality, and agriculture and manufacturing industries, with the expectation also that wage growth would drive up amid this pressure.
Secondarily, as also highlighted by Recruitics CEO Adam Stafford, we are in the early months of an AI transformation, where businesses are implementing the impacts and efficiencies driven by AI tools into their workforce planning. To that end, Microsoft’s recently released 2025 Annual Work Trend Index predicts that human-agent teams will upend the traditional org chart, citing that 82% of leaders expect to use digital labor to expand their workforce within the next 12 to 18 months. But to what extent agentic AI will come to rescue in the hourly space is yet to be seen.
Source: Gad Levanon, The Burning Glass Institute
Young Workers are Nervous
Every May and June, hundreds of thousands of U.S. college graduates enter the labor market, and this year, this group is feeling especially nervous. With economic uncertainty in full swing and companies opting to delegate entry-level and administrative tasks to AI agents, it’s a challenging environment for new grads.
According to LinkedIn‘s economic graph, the rate of hiring for entry-level talent has slowed at the same pace as all hiring since the beginning of the year (down 3% quarter over quarter), but when compared to pre-pandemic March 2020, hiring is down 23% for entry-level talent compared to an 18% decline in the overall hiring rate. And new grad talent is noticing, with entry-level employee confidence falling to record lows in May, according to Glassdoor’s economic research.
Pumping the brakes on entry-level hiring is only a bandaid solution though, since many organizations will still need to train young talent to meet their growth plans. Smart organizations are thinking now about how to engage and train early-career talent to fill tomorrow’s gaps.
Source: Glassdoor
Looking Ahead: Stay Grounded in the Data
As we head into summer, the labor market is steady but under strain. Between AI disruption, shifting immigration trends, and anxious new grads, the smart move now is to stay grounded in the data. What happens next will depend on how employers adapt to the ebbs and flows of today’s labor market dynamics, and H2 2025 will test just how agile employers’ workforce strategies are.
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