Uneventful May for US labor market
The US economy added 139K jobs in May and the unemployment rate held steady at 4.2%, right in line with market expectations. Nothing in the report changes our view on the US economy. Overall, the picture is very stable, with the pace of hiring steady and the unemployment rate flat over the past several quarters. We remain in a reasonable equilibrium, with the economy moving more slowly than it was last year and having added around one-third fewer jobs year-to-date compared to the robust job market of 2024, during which 900K jobs were added in the first five months.
Yet the impact of tariffs looms. So far, we have not seen a material change in the economic data from them. The question remains: when will they flow through to the broader economy and how significantly?
For the Fed and their ongoing rate-cutting cycle, this data suggests they’ll remain on hold for a few more months at least. We expect they’ll want to see signs of more significant weakening in the labor market (or more progress on inflation, which they’re unlikely to see as tariffs hit prices) before cutting. That suggests the next cuts won’t come until the late summer or early fall, once they have a few months of softer data. At that point, we should also have a clearer picture of the impact of tariffs on the economy, reducing some of the uncertainty that currently exists.
So far, the economy has been resilient and stable in the face of policy uncertainty and tariffs. Those have had a sharp negative impact on soft data (surveys, etc.), which we have not yet seen in hard data (jobs, spending, etc). After a stronger-than-expected earnings season and positive commentary from companies, which we think may largely offset some of the negativity in the soft data, we remain relatively sanguine and optimistic that the economy’s strength coming into the year may help prevent it being knocked off course by the tariffs imposed to date. We’ll see from the jobs reports and consumer spending data in the coming months whether that is correct. Nonetheless, the economy is slowing relative to last year. We’ll continue to monitor the data
Investing involves risk, including loss of principal invested. This information does not constitute an offer or solicitation and should not be relied upon as investment or financial advice or a recommendation of particular courses of action for all investors. Diversification does not guarantee a profit or protection against loss, nor is it possible to invest directly in an index. Equitable Advisors, LLC and its affiliates and associates do not guarantee the accuracy or completeness of any statements, statistics, data, opinions, forecasts, or predictions offered herein. All links to third-party content are provided here for your convenience and general interest. No content linked to here constitutes an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, insurance, financial, tax, legal or any other form of professional advice.