One aspect that gave a welcome tweak to the good news was that there was a broad inroad to jobs beyond health care that extended to both manufacturing and local government employment. But, while this was welcome news, another aspect was that people were staying on the unemployment line longer, and while new jobless claims had not statistically increased, those sitting on the bench have been a cause of concern for the future.
“The share of unemployed workers who have been out of work for 27 weeks or more rose to 27.5% in May, up from 20.4% a year ago and well-above pre-pandemic norms. The situation for many unemployed job seekers is grim, even in the midst of impressive monthly job gains,” said the Hiring Lab in its assessment of the May report.
It’s still a low fire, low hire environment, but with one fell swoop of the cards from further inflation, now at 3.8 percent, the scales could easily tip into recession; and, coupled with the uncertain outcome of the US-Israel war against Iran the effects on the national economy, and jobs could prove precarious.
Turning again to the Hiring Lab they offered this cautionary note:
“This kind of equilibrium can’t hold indefinitely. A market frozen between low hiring and low firing is only stable as long as nothing pushes on it. Should demand soften, the lack of hiring leaves no cushion to reabsorb workers who lose their jobs, and what now reads as a quiet labor market could tip into a rising unemployment rate quickly. The low-hire, low-fire dynamic has been remarkably durable, but durability isn’t permanence. The longer it persists, the more it’s worth watching for the first sign of which direction it finally breaks.”
When the Federal Open Markets Committee meets later this month it will be the first test of the new Federal Reserve Chair, Kevin Warsh to see if he bends to the will of President Trump who wants rate cuts, or will he according to the standards of macro economics increase rates in light of these job numbers, especially considering the revisions to the April report.
“If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah, chief global strategist at Principal Asset Management.
We still are seeing a mixed bag in the report not only with these concerns but also with wages that have seen a risen but much of that increase will be spent by working families on the increasing higher costs of housing, groceries, and of course, gasoline which has, on the average, since the beginning of the war in February increased to $1.25 per gallon.
Economists are worried about “the 55% rise in the price of diesel fuel, which is used in shipping, farming, transportation and construction. It can quickly raise costs for consumers as the higher price is passed down across a number of industries.”
The cost of diesel fuel which as the New YorkTimes Times reported in late March, is less discernible to the average consumer but whose price has climbed faster than the price of gasoline with the war, which could lead “to inflation across a wide range of goods” affecting the price and shipping of those products that most Americans rely on.
“Diesel powers a lot of basic industries,” said Vidya Mani, a visiting associate professor at Cornell University’s business school whose research focuses on supply chains. “Mining industries, chemical factories, clothing factories — a lot of those things come from diesel.”
“Because of its far-reaching consequences, it can stop a lot of industries,” she said, adding that if prices continue to rise, consumers will probably begin to see the effects on everyday items and necessities within the next several weeks.”
“Much of the diesel in the United States comes from domestic supplies. But oil companies can still price the commodity at global market rates. In January, a little more than 40 percent of the cost of diesel came from the price of crude oil, according to the Energy Information Administration” making things even murkier for consumers as time goes by without an end to the conflict.
Meanwhile, the unemployment rate remains at 4,3 percent, but, as we've stated before, this is only a snapshot in time, and other factors must be taken into consideration: as NBC News reported, “Average hourly earnings rose 3.4% from a year ago. According to Jennifer Timmerman, an analyst at the Wells Fargo Investment Institute, that’s the lowest since 2021. In April, inflation sharply jumped to a 3.8%, its highest level in three years, due to the surging price of gasoline and the resulting economic ripple effect.”
Another worrisome statistic is that “Wholesale inflation — what businesses pay other businesses for goods and services — surged to 6% in April, according to BLS data released May 13. That was sharply higher than the 4.3% in March,” they added.
Wage growth slowed to 3.5 percent in May compared to April which showed 3.6 percent and that is a figure worth watching. And it’s common knowledge that a dollar doesn;t buy what it used to factor in the Trump tariffs and the price of beef, especially ground beef, a staple of the American diet, shows increased prices, just in time for backyard barbecues, a warm weather staple for entertaining. Add to that the morning dose of java, those coffee tariffs are not helping with the daily grind.
For those that follow the market, “After the report, U.S. government bond yields surged and stocks sold off. Fed rate futures also quickly indicated that traders are now projecting a more than 60% chance of a rate hike in October and a more than 98% chance by December’s Fed meeting.”
Waiting may not be an option, said Beth Hammack, president of the Federal Reserve Bank of Cleveland, said on Tuesday, preceding Friday’s report,”“If we wait for definitive evidence that high inflation has become embedded in the economy, it may require larger policy adjustments, at greater cost."
The White House was overjoyed with the report, especially considering the sinking polls for Trump and his handling of the economy, and “I think that basically what we’re seeing is an enormous amount of positive momentum in hiring,” Kevin Hassett, the director of the National Economic Council, said on CNBC Friday morning.
Asked about wage growth tracking below inflation, Hassett deflected concerns on Bloomberg Television, saying that “real wages are going up on average about $3,000 since President Trump took office.”
Once again, driving labor gains over the last year was education and healthcare some of the largest contributors to job growth in May but there were sur[rises as well, with an unexpected gain of 70,000 jobs in leisure and hospitality, “well above the average monthly gain of 14,000 over the prior 12 months,” BLS said.
NBC reported that PNC Bank chief economist Gus Faucher noted that “the breadth of job growth has picked up in 2026.” He added that “in 2025 there were net job losses in all industries outside of healthcare, but in 2026 those industries are seeing net job growth.”
Local governments also saw job gains but in the last several months there has been a total loss of 350,000 federal jobs and many former workers are gravitating to take their experience to local governments.
One possible theory, and it’s purely speculative, is from The New York Times noted is that “construction, which has been trending up since last fall amid a massive buildup in data centers to serve the A.I. boom. Adam Schickling, an economist with Vanguard, thinks the unseasonably warm spring may have also played a role jump-starting hiring in fields dependent on weather changes.” and he added, “That is essentially something you ultimately pay back in one form or another. You’re hiring people earlier, so then you’re not hiring that person later,” he said. “I think it’s still really early to suggest that there’s a reacceleration in the labor market.”
Slowing to a crawl are financial services, including information technology to 22,000 jobs, “and the transportation/warehousing industry. That sector is “down by 92,000 [jobs] since reaching a peak in February 2025,” the agency said.”
One particular aspect that represents another cautionary note is that, as Axios reported, “The economy has averaged gains of 114,000 jobs per month so far this year, a far cry from the 10,000 monthly average added in 2025.”
May did give some blockbusting numbers, but it’s a party that might have an end in a few months. With inflation, both consumer and wholesale, against a background of uncertainty with the US and Israel war, and as a result, with climbing fuel costs, and a host of other related factors, plus lowered wages, the American economy gets, in our estimate, a B minus.
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