Last weekend, I caught up with a childhood friend working as a graphic designer. While discussing our respective careers and industries, he mentioned the difficulty his colleagues were having in finding jobs in their field, an experience that seemed to contradict the positive U.S. employment statistics reported earlier in the year. This week, both he and investors anxiously awaited the release of several related reports, hoping to gain a better understanding of the current state of the labor market and its recent shifts.
One valuable employment data report released this week was the Job Openings and Labor Turnover Survey (JOLTS), which quantifies changes in the number of layoffs, employees quitting their current jobs, hirings and unfilled (open) jobs. The April JOLTS report was released Wednesday, presenting a somewhat mixed picture of the country’s employment environment. The number of unfilled positions and new job hirings rose slightly to 7.4 million and 5.5 million, respectively, indicating improving labor conditions due to sustained availability of work. However, the same report showed a rise in layoffs to 1.8 million and a reduction in current job “quits” to 3.2 million, contradicting the signs of improvement illustrated by other areas. The quits rate is generally positively correlated with workers’ confidence in the availability of new job opportunities. April’s drop in the quits rate could, then, signify that workers may be losing confidence in their ability to find a new job after leaving their previous one. This change aligns with the longer-term trend of declining quits rates, which have been observable since the start of 2022.
While April’s JOLTS data displayed mixed results, a different and more current labor market barometer, the ADP® National Employment Report, showed a more pronounced labor slowdown for May. This report aggregates anonymized payroll data from private companies to measure the number of jobs on a month-to-month basis. It showed that only 37,000 new private-sector job openings were filled in May, well below the 130,000 expected and behind the 60,000 created in April. The figure represents the lowest job growth documented by this measure since March 2023. While the ADP® report is limited to private company activity compared to the more comprehensive government-released figures, it can still serve as a useful indicator of more broad-based hiring trends. Some fear this latest report is a bellwether of slowing labor market conditions in the months to come.
The most important pieces of employment data released this week were May’s Nonfarm Payroll report and the accompanying unemployment rate. The Nonfarm Payroll report measures the number of workers employed by almost all U.S. industries, excluding farming, military/armed forces and the self-employed. It encompasses a larger range of employers and industries than other third-party surveys and is regarded as the most accurate assessment of the current state of the job market. According to the report, the U.S. saw an increase of 139,000 employed individuals the previous month, surpassing the anticipated rise of 130,000 but falling short the increase of 147,000 recorded last month. May’s unemployment rate remained unchanged from April’s 4.2%. Equity markets reacted positively to the news on Friday morning, with the S&P 500 rising by over 1% in the first 30 minutes of the trading session. From a relative perspective, the figures contradict the surprising weakness in May’s ADP employment report and depict a labor market still showing signs of strength. However, the subtle month-over-month slowdown in new workers employed gives investors and policymakers reason to watch closely for signs of stress in the months to come.
Analyzing all these data points and reports in unison suggests there is still strength in the U.S. labor market, even if its growth is starting to slow. Continued stagnation in job creation or multi-month increases in unemployment rates, as demonstrated across multiple measures, would be needed to suggest a material change in this trend. The Federal Reserve has used this strength to justify holding interest rates at current levels since December 2024 despite mounting uncertainty and political pressure surrounding this decision. The labor market’s stability continues to act as a ballast for the economy as it navigates uncertainties surrounding tariffs, tax policy and the debt ceiling. Because of this, though, the Fed’s interpretation of the employment situation will be especially impactful. Traders are predicting that this week’s employment data will further decrease the likelihood of rate cuts before September 2025. As it stands today, the market sets the odds of a rate cut in September at 70% and a total of two rate cuts over the remainder of 2025.
Takeaways for the Week:
April’s JOLTS data was released on Wednesday with mixed news, showing an increase in available jobs, a modest decrease in workers quitting current positions and a modest increase in layoffs
May’s ADP® Employment Report showed only 37,000 jobs created for the month vs. consensus estimates of 130,000, a negative surprise to some
May’s Nonfarm Payroll data was slightly stronger than expected but lower than in April, with 137,000 jobs added to the economy. Unemployment remained at 4.2%. Major equity indices traded higher on Friday morning in reaction to the positive news