Friday's jobs report likely will show hiring cooled in May. Here's what to expect

A “We're Hiring” sign at a NC Department of Adult Correction booth at a job and resource fair hosted by the Asheville Area Chamber of Commerce in partnership with NCWorks in Fletcher, North Carolina, US, on Wednesday, April 9, 2025.

Allison Joyce | Bloomberg | Getty Images

There seems little doubt now that hiring slowed considerably in May as companies and consumers braced for higher tariffs and elevated economic uncertainty. The main question is by how much.

A small dip from the recent trend likely wouldn't be viewed as worrisome. But anything beyond that could set off a fresh round of fears about the labor market and broader economy, possibly pushing the Federal Reserve into a quicker-than-expected interest rate action.

Economists expect that when the Bureau of Labor Statistics reports the May nonfarm payroll numbers Friday at 8:30 a.m. ET, they will show a gain of just 125,000, down from an initial tally of 177,000 in April and the year-to-date monthly average of 144,000. That represents a slide but not a collapse, and markets will hinge on the degree of decline.

“Going into the NFP print, expectations have been reset lower and a reading of around 100,000 (vs. the 125,000 expected by the consensus) could fall in the 'not-as-bad-as-feared'” camp, wrote Julien Lefargue, chief market strategist at Barclays Private Bank. “Anything below the 100,000 mark could reignite recession fears, while a stronger-than-expected print could perversely be negative for risk assets as it would likely put upward pressure on [Treasury] yields.”

Consequently, the report will be a balancing act between competing concerns of a slowing labor market and rising inflation.

Data tell different stories

A broad range of sentiment indicators, including manufacturing and services surveys as well as gauges of small business sentiment, indicate flagging optimism toward the economy, led by worries over tariffs and the inflation they could ignite.

Moreover, hard data this week from ADP showed that private payrolls essentially were flat last month, growing by just 37,000 in May, a two-year low. Jobless claims also have also recently been edging higher, with last week hitting the highest since October.

Friday's payroll report, then, could be a key arbiter in determining just how much worry there is in the economy where it counts, namely the labor market, which in turn provides clues about the strength of consumers who drive nearly 70% of all U.S. economic activity.