Trump Economic Chaos Softening Labor Market
Things from today’s jobs report that we’ll be keeping our eyes on.
The labor market is softening. While today’s topline jobs number beat expectations, under the hood, there are notable data that point to a labor market that is stagnating. Unemployment remained steady at 4.2%, but both the labor force participation rate and the employment to population ratio ticked down. In addition to today’s print, we’ve seen other troubling labor market data suggesting that Trump’s policies are undermining the relatively stable labor market he inherited.
Private payroll growth came in well below expectations, weakening to its lowest point in more than 2 years. In this same report, businesses with fewer than 50 employees reported layoffs, underscoring how Trump’s chaotic tariffs are harming small businesses.
The total number of unemployed persons increased for the fourth consecutive month, marking the longest sustained increase since 2009.
Initial jobless claims increased to the highest level in eight months. Continuing claims fell slightly week over week but remain elevated and at levels not seen since late 2021.
CEOs went on record saying they’re less likely to grow their workforce in the next six months.
While job openings increased slightly this month, the quit rate fell and layoffs increased. Fewer quits reflect lower confidence among workers.
Manufacturing payrolls fell by 8,000 in April.
The Institute for Supply Management’s monthly manufacturing index shows new orders, and production both contracting, and prices increasing The manufacturing employment index also remains in contraction with the report noting that “[c]ompanies generally opted for layoffs because they are quicker to implement than attrition.”
Federal jobs continue to decrease, while state and local education sectors also contract.
In addition to the warning signs outlined above, here are some things from today’s jobs report that are worth watching to understand what’s happening with employment in America.
I. Revisions of Prior Months’ Jobs Numbers
Source: FRED, Committee Staff calculations
Note: Light blue represents the forecasted revisions for April and May based on average monthly downward revisions since January. Staff used these numbers to calculate a hypothetical 3-month moving average should today’s number be revised down in line with the trend.
During the first quarter of 2025, the 3-month moving average for total nonfarm payroll growth declined – and that decline has been exacerbated by consistent downward revisions to old data, month after month. March and April, for example, were revised down today by a combined 95k jobs. If today’s data is later revised down in line with what has been happening to old data since January, the 3-month average job growth will continue to fall since the start of the year – potentially by as much as 100k less jobs.
II. Part-Time Employment
Another important metric is the number of Americans working part-time who would actually prefer full-time employment. This measurement spiked in May, reaching its highest level since April 2019, as nearly 1.4 million workers who are seeking full-time work are now stuck in part-time positions. “Forced part-time” employment, which suggests weakness in the labor market as employers reduce hours rather than maintain full-time positions, has been steadily increasing over the past two years. It is also a bad sign for workers, as part-time schedules typically offer lower wages, fewer benefits, and lack the stability that full-time employment provides.
III. Labor Force Participation
Beyond the steady unemployment percentage, three additional, more detailed metrics for understanding the employment picture in the United States are flashing yellow –
The Labor Force Participation Rate: This metric measures the percentage of the working-age population that’s employed OR currently seeking work. Both the overall and the prime age (25-54) LFPR rates are down over the past year. This means that less people overall either have a job or are trying to get one. Declining LFPR means less opportunity and financial security for Americans.
The Employment to Population Ratio: This metric measures the share of adults who actually have jobs – providing a direct view of employment success across the population. Unfortunately, both the overall and prime age rates are down over the past year – and down in the past month.
Underemployment: The underemployment rate, also called the U6 unemployment rate, includes the share of the labor force that is unemployed PLUS those discouraged workers who've stopped looking, those marginally attached to the labor force, and part-time workers who want full-time work but can't find it. This rate has jumped over the last three months, meaning more Americans are forced to accept part-time work despite needing full-time wages, leaving millions struggling to make ends meet.
The LFPR, EPOP, and U6 data all suggest the same thing – a softening picture for employment in the United States. Tracking these metrics will become more and more important as we watch Trump’s policies get implemented.