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The Bureau of Labor Statistics released the May 2025 U.S. jobs report last week. It showed modest overall growth, but the details paint a more nuanced picture:
- Narrow job creation: Just two sectors—Healthcare/Education and Leisure/Hospitality—accounted for 96% of the month’s gains. Meanwhile, key areas like manufacturing (-8k), professional services (-18k), and government (-1k) showed weakness.
- Revised trends: Job growth for March and April was revised down by 95,000, suggesting a softer underlying trend than initially reported.
- Wage pressures persist: Average hourly earnings rose 3.9% year-over-year, beating expectations and pointing to ongoing labor market tightness.
While growth is clearly moderating, it hasn’t stalled. The broader U.S. economy is now driven by more concentrated forces—like consumer services, AI-related capital spending, and infrastructure investment.
Crucially, the labor market remains tight, with unemployment steady at around 4.2%. With slower net migration, even modest job gains are enough to maintain low unemployment, adding to wage pressure.
The economics team at KKR, the author of this post, expects the Fed to cut rates twice later in 2025, but not hastily. If tariff-related inflation fades in 2026, the door could open to more aggressive easing.
How are we thinking about the May 2025 U.S. jobs report?
by Henry H. McVey
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