U.S. added 139,000 jobs in May as the labor market steadily cools

The United States added 139,000 jobs in May, more than expected but pointing to a labor market that continues to slow.

The employment data released Friday by the Bureau of Labor Statistics exceeded forecasts for about 120,000 payroll gains but marked a decline from the revised 147,000 jobs added in April. The unemployment rate held steady at 4.2%, remaining near historic lows.

Job losses in the federal government continued to pile up, with that sector shedding 22,000 roles in May alone. The federal workforce is down by 59,000 since January, largely due to sweeping cuts by the Trump administration and multibillionaire tech executive Elon Musk’s Department of Government Efficiency project.

Even as the economy continued to add jobs at a relatively steady clip last month, the report showed other signs of a weakening labor market. The ratio of employed workers to the total population fell to 59.7%, the lowest rate since the pandemic.

And an alternative measure of unemployment that includes “discouraged” workers, or those who have stopped looking for work, returned to a post-pandemic high of 4.5%.

Heading into Friday, other data showed signs of a softening economy.

On Wednesday, private payroll processor ADP reported the weakest monthly jobs total since March 2023. While economists say ADP’s data often align with the official BLS data, the trend is clear, with ADP reporting fewer jobs added in five of the past seven months.

A separate report from the Institute for Supply Management showed that activity at U.S. service firms unexpectedly contracted last month for the first time in nearly a year, while hiring cooled.

On Thursday, the Labor Department reported weekly jobless claims came in higher than expected, reaching their highest level since October — while continuing unemployment claims remained elevated, an indication that it is taking longer for out-of-work people to find a job.

“We’re throttling back — and the damage from the trade war is still coming,” Mark Zandi, chief economist at Moody’s Analytics, told NBC News ahead of Friday’s BLS report.

Zandi said forthcoming inflation readings are likely to reflect firms raising prices because of Trump’s import taxes. Indeed, a Federal Reserve survey released Wednesday indicated “widespread reports” of companies “expecting costs and prices to rise at a faster rate going forward,” with higher tariffs “putting upward pressure on costs and prices.”

Separately, a Congressional Budget Office study now estimates inflation will increase by an average of 0.4 percentage points in 2025 and 2026 as a result of Trump’s tariffs. As prices begin to rise, consumer dollars won’t go as far, Zandi said. That will likely lead to a feedback loop of reduced economic activity and reduced hiring.

“The job market already feels fragile,” he added.

As demand softens “more palpably,” Zandi said, “we’ll start to see layoffs” — with BLS jobs data likely falling consistently below 100,000 in the coming months.

Already, firms are showing signs of holding back on investment and bringing on new workers. Earlier in the week, the BLS reported that the hiring rate remains stuck at levels last seen in 2014, when the U.S. economy was still emerging from the Great Recession.

Trump has claimed that thanks to his tariffs, the U.S. economy is “booming.” Yet he continues to pressure the Federal Reserve to lower interest rates, which would make it easier for businesses and consumers to borrow money. In a post on Truth Social on Wednesday, he pointed to the weak ADP payrolls numbers as evidence that the economy needs support.

Analysts say that despite the gathering signs of economic deterioration, the bar remains high for the Federal Reserve to lower rates. Instead, the central bank will likely continue to err on the side of keeping interest rates elevated to ensure the pace of price growth remains under control, said Andrew Husby, senior U.S. economist at BNP Paribas financial group.

For consumers, that means relief is still not in sight.

“It’s going to take something obviously cracking in a sustained way” for the Fed to reduce borrowing costs, Husby said.