Markets applauded the upside surprise Friday from the May jobs count, but traders will want to keep their eyes and ears open in coming months for significant signs of weakness that also appeared in the report. From a headline view, the 139,000 gain in nonfarm payrolls provided a nice bit of relief for a market on edge over the direction of the economy and the impact that President Donald Trump’s tariffs might bring. However, several factors in the report bear watching, if not as a signal of impending doom than at least yellow flags that the labor market is a bit more fragile than what appears on the surface. Consider the following: While the monthly number looked good, it was in keeping with a year that has seen job growth slow considerably. Through five months, the average gain is just 124,000, compared to 180,000 for the same period a year ago — a 31% slide. What appeared to be solid growth in previous months isn’t as good as it looked. Revisions took down the March and April estimates by a combined 95,000, or 26% below the prior counts. Hiring breadth was terrible. Combined, health care, leisure and hospitality and social assistance — essentially a subcategory of health care that the Bureau of Labor Statistics nonetheless parses out — accounted for 126,000 of the jobs, or nearly all of the hiring for May. Health care benefits greatly from government assistance, which may or may not be drying up depending on how Trump’s “big beautiful” spending bill ends up. So if you worked in a medical facility, restaurant or bar, jobs were plentiful. Otherwise, you were out of luck. Wages rose more than expected. While that’s a good thing if you’re employed, it could work against hopes for lower interest rates if Federal Reserve officials change their thinking and consider the labor market could, in fact, be a source of inflation. Government jobs, a prior significant source of employment gains, fell by 22,000 at the federal level. With cuts from the Department of Government Efficiency approaching 300,000, per Challenger, Gray & Christmas, this will be a space to watch closely as unemployment benefits and severance pay run out. “The May jobs report was mediocre. The headlines were decent, but the details were considerably worse,” wrote Bill Adams, chief economist at Comerica Bank. “Tariffs were a headwind to private job growth, with losses in manufacturing, retail, and professional services. Job gains in other cyclical private industries were anemic, reflecting the drag from policy uncertainty.” Still, markets liked the report , even if they bet more heavily against significant Fed easing this year. Traders now see zero chance of a rate cut when the central bank meets again in less than two weeks, with odds diminishing of further reductions, according to CME Group data . Instead, investors were relieved that despite an array of headwinds and uncertainty, the labor market is still standing. “It is a good thing that the American economy is so resilient and dynamic because it has been able to endure the headwinds caused by an ever-changing trade policy and higher tariffs,” wrote Joseph Brusuelas, chief economist at tax consultancy RSM. “That resilience, though, has its limits, as the May employment report started to show on Friday.”
