- The US jobs report for May is expected to show a slowdown in hiring compared to previous months, after two consecutive months of strong gains. However, job growth is likely to remain at levels consistent with a relatively stable labor market.
Investors are awaiting the monthly jobs report from the US Department of Labor set to be released today, which is one of the most impactful economic indicators on monetary policy decisions and financial markets.
Analysts believe the upcoming report will likely confirm that the ongoing war in the Middle East, which has contributed to rising inflation through the significant spike in oil and energy prices, has not yet had a substantial impact on the U.S. labor market.
Experts point out that financial support measures taken by the government, primarily tariff refunds and tax exemptions, have helped boost corporate profits and allowed them to avoid a widespread wave of layoffs.
Cautious hiring and limited layoffs
Despite the robustness of the labor market, U.S. companies are exhibiting clear caution regarding new hiring.
After the uncertainty caused by the wide-ranging tariffs imposed by President Donald Trump last year, companies now face a new level of ambiguity related to the war between the U.S. and Israel on one side and Iran on the other.
In contrast, layoff rates remain extremely low, which maintains what economists describe as a state of "slow hiring and slow layoffs," a balance that allows the labor market to stay stable without registering significant jumps in employment or unemployment.
This environment gives the Federal Reserve extra space to keep interest rates unchanged while monitoring the inflation effects caused by the war and rising energy prices.
Brian Bethune, an economics professor at Boston College, expressed some surprise at the economy's resilience during this long period, noting that tax and tariff refunds played an important role in offsetting the effects of rising fuel and energy prices.
He added that the value of these refunds is estimated to range between $150 billion and $200 billion, which has helped support corporate profits and reduce pressures on them, confirming that the economic environment remains positive even if it is not ideal.
Job and unemployment forecasts
Surveys available on Investing Saudi Arabia expect that the U.S. economy may have added around 85,000 new jobs in May.
This compares to the addition of 115,000 jobs in April and 185,000 jobs in March.
Analysts' estimates ranged between 50,000 and 125,000 jobs, reflecting a high degree of uncertainty regarding the pace of hiring last month.
Despite this anticipated slowdown, the expected number is still above the average monthly job growth of 76,000 jobs since the beginning of the year.
Economists see limited chances for significant adjustments to previous months' data, especially after the U.S. Bureau of Labor Statistics updated the statistical model used to estimate jobs created by new business establishments or closures of existing ones.
Demographic changes support unemployment stability
Estimates suggest that the U.S. economy currently needs to create between 0 and 50 thousand jobs per month just to maintain labor market stability.
This is due to the slowdown in labor force growth as a result of tightened immigration policies and reduced numbers of new workers entering the market.
This factor has helped limit upward pressures on the unemployment rate in recent months.
Most economists expect the unemployment rate to remain at 4.3% for the third consecutive month.
Although some estimates suggest the rate may rise to 4.4%, this will not change the overall picture that indicates the labor market remains relatively stable.
At the same time, the U.S. labor force has decreased by about 500,000 people since February, meaning that any return of these job seekers could lead to a slight increase in the unemployment rate in the coming months.
The Fed is watching closely
Financial markets expect the Federal Reserve to keep the main interest rate within the current range of 3.50% to 3.75% until next year.
This came after the U.S. Supreme Court overturned tariffs that had been previously imposed in February, prompting some companies to apply for refunds.
This development has contributed to boosting U.S. corporate profits, which increased by $40.4 billion during the first quarter, while profits continue to register consecutive increases since the second quarter of 2025.
Oil shock increases uncertainty
The conflict in the Middle East has entered its fourth month, while gasoline prices in the United States have risen by more than 40% since the crisis began.
Government data showed last week that inflation recorded its fastest pace of increase in three years during April.
In light of this oil shock, companies have become more cautious in hiring, while low layoff rates remain the primary factor supporting overall job growth.
The Federal Reserve's "Beige Book" report released Wednesday indicated that hiring in May remained highly selective and primarily focused on critical jobs or replacing employees who left their positions.
Stephen Douglas, chief economist at Nisa Investment Consulting, stated that the current stability in the labor market is likely to persist, but he does not expect a strong recovery in the near term.
He added that risks tend to lean towards a gradual rise in the unemployment rate over the next 12 months, which could prompt the Federal Reserve to implement several rate cuts after the war concludes.
Temporary factors affecting May's data
Experts believe that the anticipated slowdown in job growth during May is partly due to the fading positive impact of mild weather that supported economic activity in April.
The strike of about 4,000 members of the Harvard Graduate Student Union is also expected to have negatively impacted employment figures.
The transportation sector is also likely to have lost some jobs after the new federal restrictions on commercial driver's licenses for non-U.S. citizens, with some economists predicting a loss of about 10,000 jobs per month due to these measures.
A continued decline in employment in the federal government sector is also expected, after the White House launched a broad campaign last year to reduce the number of federal employees, despite recent attempts within some agencies to rebuild staffing levels.
Sectors supporting growth despite challenges
There still remains a disagreement among economists regarding how quickly the bankruptcy of Spirit Airlines will reflect on official job data.
In contrast, the healthcare sector is expected to continue playing a key role in supporting the labor market, benefiting from an aging population and rising demand for medical services.
The entertainment and hospitality sector is also expected to record additional job gains, supported by early hiring related to the upcoming FIFA World Cup tournaments.
Economists at JPMorgan noted that the recent surge in job growth has been heavily concentrated in sectors reliant on non-citizen labor.
The bank believes this trend may continue in the coming period, especially with the declining media focus on immigration campaigns, which may drive at-risk workers to seek job opportunities more actively due to limited financial savings.
Overall, the current picture of the U.S. labor market appears to be one of cautious stability, as companies continue to retain their employees despite rising geopolitical and inflationary risks, while investors await upcoming job data to see if this delicate balance will persist or if the U.S. economy will start showing clearer signs of weakness in the second half of the year.
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