Labor Market Cools, Resilience Persists

May 6, 2025

As part of our ongoing effort to keep you informed about the economic landscape, we’re sharing highlights from the latest U.S. jobs report. Employment trends offer valuable insights into the overall health of the economy and can help frame expectations around interest rates, inflation, and potential market shifts. While April’s job report data indicates some signs of cooling, certain sectors remain strong, and the broader labor market continues to show resilience.

New Jobs Report

Businesses added 177,000 to payrolls in April, a sign that the labor market remains resilient despite headwinds. This followed a revised 185,000 gain in March. It's worth noting that downward revisions are common during periods of slowing growth as more complete data becomes available. For example, March’s initial figure was revised down by 43,000, which may indicate that job creation isn’t as strong as originally reported, possibly reflecting cooling momentum in certain sectors.

Concentrated Sectors

Employment gains were concentrated in healthcare, transportation and warehousing, and financial services. These sectors continue to show stable or growing demand, even as others begin to level off. Healthcare remains a cornerstone of labor market strength due to demographic trends and post-pandemic backlog, while transportation and warehousing continue to adjust to evolving consumer behavior and supply chain normalization.

Current vs. Long-Term Unemployment Rates

The current U.S. unemployment rate remains steady at 4.2%. An important trend to monitor is the rise in long-term unemployment, now at 23.5% of the total unemployed—edging back toward pre-pandemic levels and reversing earlier progress in shortening jobless durations. The long-term rate includes those who are unemployed and are actively seeking employment. It does not include retirees or those on leave. This data comes from the U.S. Bureau of Labor Statistics (BLS).

Federal Payrolls

Meanwhile, federal payrolls have declined by 26,000 since the start of the year, bringing them close to early 2024 levels. This could reflect a mix of budget constraints and shifting government priorities. It's also important to remember that individuals on paid leave or receiving severance are still counted as employed in the establishment survey, which can mask some early signs of workforce reductions.

Key Takeaways

While global trade uncertainty and policy risks persist, businesses are still expanding their payrolls, which suggests underlying confidence in the economy’s near-term trajectory. The continued strength in sectors like healthcare and financial services reinforces the idea that the economy may be slowing, but not stalling. If labor market conditions remain firm and key external pressures—such as tariffs—are eased, there’s a reasonable path for the U.S. to avoid a deep or prolonged recession.

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