US labor market remains stable despite tariff uncertainty
On June 6, the U.S. Department of Labor released data for May on nonfarm payroll employment and the unemployment rate. The data show that, although monthly employment growth continues to slow, it has not collapsed — a positive development given the recent economic environment in the United States, where uncertainty is the order of the day.
In May, there was a net increase of 139,000 jobs, which represents a smaller increase from the 147,000 in April. The May figure is surprising, as analysts had expected an increase of 126,000 jobs. Meanwhile, the unemployment rate remained unchanged at 4.2%, staying within a range of 4.0% to 4.2% since May 2024. The labor force participation rate also remains stable, averaging 62.5%.
Following the trend of previous months, the sectors that contributed the most to employment were health care, leisure and hospitality, and social assistance. Federal government employment decreased again by 22,000 jobs. The proposed federal budget for fiscal year 2026 reflects a net reduction of 107,000 jobs (excluding defense) for next year.
The manufacturing sector also saw employment decrease by 8,000 jobs, after registering an increase of 6,000 in the previous two months. The decline was concentrated in the machinery and equipment sector, which includes electronic equipment manufacturing. In retail trade, employment decreased by 6,500.
Overall, private employment increased by 133,000 jobs, a smaller increase than the 153,000 in May 2024.
Data on the U.S. labor force prevents the Federal Reserve from lowering interest rates, which remain between 4.25% and 4.50%. They also suggest that the economy is far from a recession. For us in Puerto Rico, the behavior of the U.S. labor force impacts us in several ways that affect our economy, including the influence on interest rates and the positive effect on demand for sectors like tourism.
Employment in Puerto Rico remains high, but much of the recent growth has been in part-time jobs at minimum wage and no benefits, so it is neither sustainable nor necessarily desirable.
Author Graham Castillo is president of Estudios Técnicos Inc.
