Economists Forecast Moderate Hiring Amid Policy Uncertainty
Economists anticipate the US labor market maintained modest growth in May, though caution persists due to federal workforce reductions and ongoing trade policy uncertainty. Here’s what to expect from Friday’s nonfarm payrolls report:
Key Forecast Highlights (per FactSet)
Employment gains: 125,000 jobs (vs. 177,000 in April)
Unemployment rate: Rising to 4.3% (from 4.2%)
Wage growth: 0.3% month-over-month (vs. 0.2% in April)
Analyst Perspectives
Oren Klachkin (National Economist):
“Businesses are in wait-and-see mode. Hiring has slowed but layoffs haven’t materialized. The market is craving policy certainty.” His 130,000-job estimate slightly exceeds the consensus.
Goldman Sachs Analysts:
Project 125,000 new jobs with three key factors:
- Private sector showing resilient hiring
- Federal employment declining by 10,000 (partially offset by 20,000 state/local government gains)
- Unemployment rate holding at 4.2% with 0.3% wage growth
Tariff Impact: Still Invisible
Experts agree Trump administration trade policies haven’t significantly affected May data:
Preston Caldwell (Morningstar): “Lag effects mean we won’t see tariff impacts yet. Consumer spending and business investment data from April show no major disruption.”
Federal workforce cuts: While 26,000 federal jobs disappeared since January (excluding NYT-reported 58,000 layoffs/76,000 buyouts), Klachkin notes: “The full ripple effects on healthcare/education sectors won’t appear until summer or fall.”
Wage Growth and Inflation
- Expected 0.3% wage increase (following April’s 0.2%)
- Klachkin predicts stable short-term wage growth that could help inflation approach the Fed’s 2% target
Fed Policy Implications
June rate cut prospects:
CME FedWatch: 98.7% probability of unchanged rates
Klachkin’s view: “No urgency for policy changes now, but weak data could force the Fed’s hand”
Market Expectations
The report will be scrutinized for:
- Confirmation of labor market softening
- Early signs of tariff-related employment impacts
- Wage trends’ influence on inflation dynamics
While May’s numbers likely won’t show dramatic changes, economists will watch closely for any hints that recent economic uncertainties are beginning to affect hiring decisions. The Federal Reserve will likely maintain its “wait-and-see” approach unless the data reveals clearer signs of weakening.
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