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    Home»News»US Job Growth Slows in May Amid Tariff Uncertainty, Despite Strong Economic Indicators
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    US Job Growth Slows in May Amid Tariff Uncertainty, Despite Strong Economic Indicators

    ObservernewsBy ObservernewsJune 6, 2025No Comments6 Mins Read
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    In May, hiring in the United States slowed slightly but remained resilient, as businesses grappled with uncertainty surrounding President Donald Trump’s fluctuating tariff policies. The job market showed solid growth, but the pace of hiring was slower than in the previous month, reflecting the broader economic concerns tied to global trade policies and the potential fallout from tariffs. The U.S. economy added 139,000 jobs in May, according to the latest data from the U.S. Bureau of Labor Statistics, which exceeded economists’ expectations despite the deceleration. While this growth marked a slight dip from the 177,000 jobs added in April, it still represented positive momentum, especially as the unemployment rate remained unchanged at a historically low 4.2%.

    The May job growth figure, although slightly lower than the monthly average of 149,000 jobs added over the previous 12 months, signaled the continued strength of the labor market. Yet, uncertainty surrounding global trade tensions, particularly with China and other major trading partners, weighed heavily on businesses’ hiring decisions. As President Trump’s tariff policies fluctuated, many companies remained cautious, unsure of the long-term impacts on their bottom lines. With trade deals and tariffs in flux, the hiring rate showed signs of slowdown, particularly in sectors directly affected by import duties and international trade.

    Federal government employment showed a notable decline of 22,000 jobs in May, contributing to an overall loss of 59,000 federal jobs since January. This decrease can be attributed to President Trump’s establishment of the Department of Government Efficiency, or DOGE, which has been focused on cutting federal spending. Part of this effort has involved reducing the size of the federal workforce, particularly in non-essential roles, as the administration seeks to streamline government operations. The federal job losses have added a layer of uncertainty to the overall employment picture, particularly as government spending and fiscal policies are key components of economic stability.

    On the international front, the trade agreement between the U.S. and China in May brought some relief to global markets, as both countries agreed to cut tit-for-tat tariffs. The deal between the world’s two largest economies sparked a surge in the stock market and fueled optimism among investors. The accord marked a significant step toward easing tensions between the U.S. and China, both of which have been locked in a trade war for several years. With the tariff reductions, Wall Street firms began to soften their forecasts for a potential economic downturn. The agreement signaled a potential shift in trade policy, which could help mitigate some of the uncertainty faced by businesses that rely on global supply chains and international trade.

    In addition to the U.S.-China trade agreement, President Trump rolled back several of his administration’s previous tariff measures, including those imposed under the so-called “Liberation Day” tariffs. A large swath of these tariffs, which targeted dozens of countries, was paused by the White House in May, providing some breathing room for businesses that had been struggling with increased import costs. Trump also took action to ease sector-specific tariffs on autos and eliminated certain duties on goods coming from Mexico and Canada. These moves signaled a shift in the administration’s approach to trade, as it sought to reduce the burden on businesses that were facing rising costs.

    Despite these tariff reductions, the U.S. still maintains a 10% across-the-board tariff on nearly all imports, with exceptions for certain goods like semiconductors and pharmaceuticals. Additionally, specialized tariffs on steel, aluminum, and automobiles remain in place. China, the third-largest trading partner of the U.S., faces a 30% tariff on its exports to the U.S., further complicating the trade relationship between the two nations. These ongoing tariffs, though somewhat reduced, continue to cast a shadow over the broader economy, with companies like Pepsi, Goldman Sachs, and Target warning of potential losses due to the uncertainty surrounding trade policies.

    Major nationwide retailers, including Walmart and Best Buy, have also raised concerns about the impact of tariffs on their operations. As tariffs increase the cost of imported goods, businesses face the risk of passing those costs onto consumers in the form of higher prices. This, in turn, could weaken consumer spending, which accounts for about two-thirds of U.S. economic activity. If consumer spending weakens, companies may face challenges in maintaining sales, which could lead to layoffs or hiring freezes as businesses adjust to changing demand. The threat of higher costs and reduced spending could ultimately slow the pace of job growth in sectors most affected by international trade and tariffs.

    Despite these concerns, key economic indicators have largely defied predictions of a downturn. The unemployment rate remains low at 4.2%, signaling continued strength in the labor market. Job growth, while slower than in previous months, continues to be a positive sign of economic resilience. Inflation, a key measure of economic health, has cooled in recent months, reaching its lowest level since 2021. These factors have helped to offset some of the negative impacts of tariff uncertainty and trade tensions, providing a sense of stability to the broader economy.

    The Organization for Economic Co-operation and Development (OECD) has also weighed in on the U.S. economy’s prospects. In a recent report, the OECD forecast continued growth for the U.S. economy in 2025 and 2026, although at a slower pace than the previous year. This outlook reflects a more cautious economic environment, as businesses and consumers alike remain wary of the impact of ongoing trade disputes and geopolitical instability. Nevertheless, the OECD’s positive outlook suggests that, despite the challenges posed by tariff policies and international trade, the U.S. economy remains on solid footing.

    In the coming months, the continued evolution of trade policies, particularly with China and other major economies, will play a significant role in shaping the direction of the U.S. economy. Businesses will be closely monitoring developments in the trade negotiations and adjusting their strategies accordingly. While the immediate outlook for job growth remains positive, ongoing trade uncertainties may continue to dampen hiring in certain sectors, especially those directly impacted by tariffs.

    For now, the U.S. job market remains strong, and the broader economy has shown resilience in the face of global trade challenges. However, the slowdown in hiring in May and the ongoing concerns about tariffs and international trade point to a more cautious economic environment in the months ahead. As businesses navigate the complexities of trade policy, they will need to balance their hiring strategies with the realities of the global marketplace.

     

    The U.S. economy’s ability to weather the uncertainty surrounding tariffs and trade agreements will depend on the resolution of these global issues and the ability of businesses and consumers to adapt to the evolving economic landscape. As President Trump continues to adjust his tariff policies and seek new trade deals, the full impact on hiring, consumer spending, and economic growth will unfold in the coming months.

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