Key facts
- US employment growth likely moderated in May after strong gains in prior months.
- Economists expect nonfarm payrolls to increase by 85,000 in May, down from 115,000 in April.
- The unemployment rate is forecast to remain unchanged at 4.3% for the third consecutive month.
- The Middle East conflict has boosted gasoline prices but has not yet materially impacted the jobs market.
- Low layoffs are contributing to a stable labor market, described as a 'slow-hire, slow-fire' equilibrium.
- Fiscal stimulus, including tax and tariff refunds, has supported corporate profits and business hiring.
U.S. employment growth likely moderated in May, with economists expecting the Labor Department's report to show an increase of 85,000 nonfarm payrolls, down from 115,000 in April. Estimates for job growth ranged from 50,000 to 125,000. The unemployment rate is forecast to remain unchanged at 4.3% for a third consecutive month, though some predict it could round up to 4.4%. The labor market is characterized by low layoffs, creating a 'slow-hire, slow-fire' equilibrium, which provides the Federal Reserve room to keep interest rates steady while monitoring inflation fallout from the Middle East conflict. Fiscal stimulus, such as tariff and tax refunds, has bolstered corporate profits and allowed businesses to avoid large-scale layoffs, offsetting higher gasoline prices. The Federal Reserve's Beige Book noted that hiring remained selective and focused on critical roles or attrition replacement in May. Financial markets anticipate the Fed will maintain its benchmark interest rate between 3.50% and 3.75% into next year. Corporate profits increased by $40.4 billion in the first quarter, supported by tariff refunds.