Weak Labor Data, Tariff Concerns Cloud Economic Outlook — Evening Brief – 06.05.25 

Interpreting labor market data is proving to be a difficult task for assessing the macroeconomic landscape as the U.S. economy navigates uncertainty from mounting tariffs. Data released over the past two days highlights growing signs of weakness, fueling concerns about a slowdown in hiring and potential broader economic fallout. 

Initial jobless claims for the week ending May 31 rose by 8,000 to 247,000, exceeding expectations of 236,000 and up from a revised 239,000 the prior week. The four-week moving average climbed to 235,000, while continuing claims held steady at 1.904 million, slightly better than the 1.910 million consensus. 

Separately, the Challenger, Gray & Christmas report showed that U.S.-based employers announced 93,816 job cuts in May. While that represents a 12% drop from April’s 105,441, it is a 47% increase from the same period last year. Year-to-date, employers have announced 696,309 job cuts—an 80% jump over last year and nearing the total for all of 2024. 

“Tariffs, funding cuts, consumer spending, and overall economic pessimism are putting intense pressure on companies’ workforces,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Companies are spending less, slowing hiring, and sending layoff notices.” 

The ADP Employment Report, released on Wednesday, added to the cautionary tone, showing that private-sector payrolls grew by just 37,000 in May—the weakest monthly increase since March 2023 and well below forecasts. While softer gains in healthcare and education weighed on the report, it aligns with a broader trend of cooling labor demand. 

“The ADP details weren’t quite as soft as the headline,” Bryan Jordan, chief strategist at Cycle Framework Insights, told Connect, “but the report in total jibed with the prevailing trend of a cooling labor market and at least hinted that the pace of deceleration is picking up speed.” He added that this mirrors observations in the Fed’s latest Beige Book, which cited falling labor demand in every Federal Reserve district. 

Though ADP’s predictive power for the official Labor Department payrolls figure is inconsistent, the weak reading has amplified attention on Friday’s jobs report. Economists expect private-sector hiring to have slowed to 123,000 jobs in May, down from 167,000 the prior month. 

With economic clarity in short supply, analysts warn that a significantly weaker-than-expected payroll report could confirm fears about the economic damage from an escalating global trade conflict.