Along with the cooling job data from the U.S. Labor Department, payroll firm ADP reported that private sector hiring hit a two-year low.
U.S. Job Market Shows Signs of Fatigue as Hiring Slows Despite Modest Gains
The U.S. labor market, long considered a pillar of economic strength, is beginning to show clear signs of fatigue. Although 139,000 new jobs were added in May—slightly above the forecasted 133,000—this figure still trails April’s revised total of 147,000, according to data released by the Labor Department. Adding further concern, job gains for both March and April were significantly revised downward by a combined 95,000.
At a glance, May’s job numbers seem steady. But beneath the surface, the details reveal a labor market struggling to maintain momentum amid growing economic uncertainty.
Where the Jobs Came From
The healthcare sector led the charge, contributing 62,000 jobs to the overall total. The leisure and hospitality industry followed closely with 48,000 new positions—30,000 of those in food services alone. Social assistance programs added another 16,000.
However, this was not the story across the board. Federal government employment fell by 22,000, and several key industries—manufacturing, wholesale and retail trade, transportation, and warehousing—saw little to no movement. These stagnant sectors reflect broader anxieties over tariffs and global trade tensions that are dampening investment and hiring.
ADP Data Paints a Stark Picture
While the Labor Department’s figures are carefully reviewed and often subject to revision, payroll firm ADP released a much more alarming snapshot. Their report, which tends to provide a more immediate read of employment trends, showed the U.S. economy added just 37,000 jobs in May—the weakest figure in two years.
Private sector hiring has taken a noticeable hit, with sharp declines in goods-producing industries. Manufacturing recorded a net loss of 3,000 jobs, while the natural resources and mining sector shed 5,000. Only construction offered a small offset, adding 6,000 jobs.
Even sectors that did see growth offered little reason for optimism. Leisure and hospitality—a traditionally low-wage segment—accounted for the bulk of job additions, with 38,000 new roles. Financial services followed with 18,000. Meanwhile, sectors like education and healthcare, typically considered more stable, saw cuts totaling 13,000 jobs.
Employers Hit the Brakes
Evidence is mounting that many companies are becoming more cautious. The Job Openings and Labor Turnover Survey (JOLTS) for April showed a rise in openings—to 7.4 million—but actual hiring fell. Economists warn that a growing gap between job openings and hires often signals hesitation on both sides: companies are unsure about expanding, and workers are reluctant to take risks.
Hiring freezes and slowdowns have become more widespread. American Airlines has paused recruitment for flight attendants. Financial firms like T. Rowe Price have reduced hiring plans. Even prestigious universities such as Johns Hopkins are holding back on new positions as research funding becomes less certain.
Small businesses, often the first to feel the effects of economic strain, are being hit especially hard. According to payroll processor Homebase, hiring among small businesses dropped 4.4% in May compared to the same time last year. Many cite tariff-related uncertainty and reduced demand as reasons for freezing hiring or cutting staff.
Warning Signs from Housing and Manufacturing
Beyond the labor numbers, other economic indicators are flashing yellow. Residential construction declined for the third consecutive month in April, down 0.9%, suggesting that both homebuilders and potential buyers are pulling back. Meanwhile, factory orders dropped sharply by 3.7%, pointing to reduced demand across key sectors of the economy.
These trends have serious implications. A slowdown in housing and manufacturing typically leads to ripple effects in related industries, from raw materials to logistics.
The Outlook: Fragile and Uncertain
Moody’s Analytics chief economist Mark Zandi offered a stark assessment of the May report, stating that monthly job gains are not only moderating but are also being consistently revised lower. “After revision, monthly job gains appear to be closing in on 100,000,” he noted, warning that the economy is becoming increasingly fragile amid intensifying global trade tensions.
Nela Richardson, chief economist at ADP, echoed this sentiment. “After a strong start to the year, hiring is losing momentum,” she said. The sectors that traditionally drive stable employment are no longer showing the same resilience, and the jobs being added are increasingly concentrated in lower-wage industries.
Final Thoughts
The U.S. job market isn’t in freefall—but it’s clearly softening. While the economy is still adding jobs, the pace is slowing, and the composition of those jobs is changing. Higher-paying, goods-producing roles are shrinking, while lower-paying service jobs fill the gap.
With mounting pressures from global trade uncertainty, weak demand in housing and manufacturing, and a growing caution from employers, the labor market may continue to cool in the coming months. For job seekers, policymakers, and businesses alike, the message is clear: the era of robust, across-the-board hiring is showing signs of coming to a close.
