CNN
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The government’s May jobs report, slated for release at 8:30 a.m. ET Friday, could reveal the first signs of the impact on American workers of President Donald Trump’s harsh on-again, off-again tariff policy.
The consensus forecast is for the US economy to have added 130,000 jobs, slowing from a stronger-than-expected 177,000 gain in April, and for the unemployment rate to hold at 4.2% for the third consecutive month, according to FactSet estimates.
“The labor market is good, but it’s not exceptional, and we’re in the process of putting some real strain on the economy,” Claudia Sahm, New Century Advisors chief economist, told CNN in an interview.
A case in point: Last June, after almost a full year on the job hunt, Jordan Williams landed a role at a high-growth, United Kingdom-based outdoor apparel brand that was looking to build out its US operations.
Passenger Clothing was well positioned for expansion: The company landed orders with REI, Scheels and others; and Williams, a Portland, Oregon-based outdoor industry veteran, was excited for the ride.
Until April.
“Upon ‘Liberation Day,’” Williams said, nodding to the moniker Trump assigned to his blowout tariff announcement on April 2, “I was liberated from employment.”
Overnight, the US went from being Passenger’s biggest potential growth driver to its biggest existential threat. For every $1 million of recycled fabrics, organic clothing and other products that landed in the US from countries such as India and China, Passenger was responsible for an additional $500,000 of duties, the company said in a mid-April statement announcing the pause of its US operations.
Williams officially lost his job on April 11.
Economists have warned that early layoffs like Williams’ could be the first signs of labor market fallout from Trump’s steep (and shifting) tariffs, which have ramped up uncertainty testing the nimbleness of businesses of all sizes.
The Labor Department’s weekly jobless claims report has shown higher numbers of first-time claims last month as well as people who have remained on unemployment for multiple weeks.
Last week, first-time claims rose more than expected and totaled an estimated 247,000 filings, marking the highest weekly tally since October 2024, according to Department of Labor data released Thursday.
Continuing claims, which are filed by people who have received unemployment insurance for at least a week or more, continue to bump up against a three-and-a-half-year high.
“This is a market where there are stops and starts, and there are pullbacks in hiring,” Nela Richardson, chief economist at payroll giant ADP, said Wednesday. “With establishments, especially small establishments, when there’s a lot of uncertainty — it doesn’t mean that the demand isn’t there but the timing may be off — firms would rather wait and see than hire aggressively.”
The hiring rate, the number of hires as a percentage of total employment, ticked higher in April to 3.5%, but remains below pre-pandemic levels, according to Bureau of Labor Statistics data released earlier this week.
And by ADP’s count (which doesn’t always correlate with the official jobs report) hiring dropped off precipitously in April and May, when the private sector gained 60,000 and 37,000 jobs, respectively.
“The weak numbers we’re seeing now does not point to a labor market that’s collapsing, but there is hiring hesitancy,” Richardson said Wednesday.
“It’s like driving through fog for some of our firms here,” she added.
Though the ripple effects from various Trump policies could take longer to show up in the data, the federal workforce reductions have already started appearing. The federal government posted job losses for three consecutive months, dropping 13,000 jobs in February, 4,000 in March and 9,000 in April, BLS data shows.
More losses could be spread over many months to come: Not all federal workers were laid off immediately, and other actions are being challenged in court.
Through May, announced job cuts are running significantly higher than in recent years; however, the lion’s share of the cutbacks have come from the federal government.
Department of Government Efficiency-related cost-cutting and its downstream effects have led to more than 294,000 announced job cuts, according to Challenger, Gray & Christmas data released Thursday. Another 131,257 announced cuts have been attributed to “market/economic conditions,” while 2,097 have been directly tied to tariffs.
“Tariffs, funding cuts, consumer spending, and overall economic pessimism are putting intense pressure on companies’ workforces,” Andrew Challenger, senior vice president of the outplacement and coaching firm, said in a statement. “Companies are spending less, slowing hiring, and sending layoff notices.”
DOGE’s actions and economic uncertainty have driven job cut announcements significantly higher than last year: Through the first five months of the year, employers have announced 696,309 job cuts, an 80% increase from the comparable year-ago period, according to the Challenger report.
It’s also the third-highest total for a January-through-May period (behind the pandemic in 2020 and the Great Recession fallout in 2009) since Challenger started tracking employers’ layoff intentions in 1993.
In May, employers announced 93,816 job cuts, a decrease of 12% from April.
The recent surge in layoff announcements could indicate that the labor market may see a further softening in the months to come (given the timing of the actions, severance and other effects); however, as it stands now, layoffs aren’t mounting.
Also, jobless claims (a proxy for layoffs) and the rate of layoffs and discharges remain below pre-pandemic levels, Labor Department data shows.
Still, the impacts from tariffs might very well by a slow burn, Sahm said.
“We are still early days,” she said.
