Analysis of Topline Figures in the May BLS Report
The economy added 177,000 jobs in April while the unemployment rate remained at 4.2%. The February and March job gains were revised down by 15,000 and 43,000, respectively.
The April job gains came primarily in the healthcare and education (+58,000), transportation and warehousing (+29,000), and leisure and hospitality (+24,000) sectors. The federal government lost 9,000 jobs in April, with losses now exceeding 26,000 so far this year. The auto manufacturing sector, of particular interest to the President, lost almost 5,000 jobs.
ADP’s private payroll data showed only 62,000 jobs were added in April. Interestingly, while many sectors matched the BLS’ numbers, the education and health services sectors lost 23,000 jobs. If ADP’s numbers are correct, then the long-term, multi-year decline in private sector job creation will continue.
According to the New York Federal Reserve, recent college graduates are having an increasingly difficult experience in the labor market. Their joblessness rate spiked to 5.8% (the highest since 2021), while the underemployment rate rose to 41.2%. These figures are three-month moving averages, which suggest that the rise is a significant departure from the pre-Trump trend.
As college graduates experience labor market difficulties, student loan borrowers will endure their own challenges. On May 5, the Trump administration ordered defaulted student-loan borrowers back into the hands of collection agencies. Of the roughly 42 million Americans with student loans, about 5 million are in default.
Now, the wages and benefits of these defaulted borrowers will be garnished to pay back the loans, which will almost certainly lead to a decline in consumer spending to the tune of $63 billion. 1 in 5 borrowers are currently classified as “seriously delinquent”, meaning they are 90 days or more past due, according to a TransUnion report.
The debt collection efforts for defaulted student loan borrowers overlap with the increased reliance on debt by consumers for spending on everyday expenses. A quarter of consumers are now using buy-now-pay-later (BNPL) services to finance groceries, up from 14% the previous year. As a consequence of debt-financed household spending, the percentage of credit card borrowers making their minimum payments reached an all-time high in the first quarter of this year. As the Federal Reserve declined to lower its interest rate target on May 7, households dependent on debt financing for their spending will continue to face heightened difficulties.
The Possibility of a Tariff-Induced Recession
While the labor market is being lauded as resilient, and rightly so, there are still concerning trends in other areas of the economy. There have been recent headlines about a possible slowdown in shipments from China and the rise in so-called “blank sailings.’ Blank sailings are when a shipper cancels a scheduled stop at a port entirely. This can happen when there are changes in the demand for cargo or in the case of customers cancelling shipments. A shipper will “blank” the sailing and reroute goods on another voyage.
This scenario is playing out in real time thanks to the uncertainty of US trade policy under the Trump administration. Many factors, including the proposed 145% tariffs on China and the recently closed de minimis exemption that enabled duty-free imports of some consumer goods produced in China, have led to a plunge in cargo bookings from China to the US.
The drop in transpacific shipping activity prompted the chief economist at Apollo Global Management to declare that a trade-induced recession was likely to occur in the summer. As container ships stop coming to US ports, the demand for trucking halts, leading to layoffs in the trucking, warehousing and retail industries. This chain of events is why the Longshoreman Union issued a statement calling the tariffs “reckless” and a “direct attack on the working class,” while warning of catastrophic job losses across the supply chain.
This trade-induced recession scenario is likely what prompted the CEOs of Walmart (both the largest retailer and private employer in the United States), Target and Home Depot to meet with the president on April 21. It was widely reported that they told the president directly that his trade policies could lead to empty shelves in the coming weeks.
These trends in trade and consumer finance coincide with the recent Bureau of Economic Analysis announcement that the advance estimate of the US’s first quarter of 2025 GDP was an annualized -0.3%. This means the economy shrank over the first 3 months of 2025 after a 2.4% annualized growth rate in the fourth quarter of 2024. The primary reason for this decline was due to a surge in imports, which is a sign that firms were attempting to get ahead of the tariffs.
Consumer spending and private investment remained steady during the first quarter of this year. However, the rise in imports contradicts the president’s goal of reviving US manufacturing and increasing exports.
In fact, the ISM manufacturing report showed economic activity in the manufacturing sector contracted for the second month in a row. Demand weakened as new orders and exports contracted sharply. Employment slowed, which showed up in the BLS numbers.
A Trade Deal Reached, Uncertainty Remains
The word uncertainty can be heard on Wall Street and at kitchen tables across the country. It is becoming impossible to make informed financial decisions due to the heavy fog of trade wars hanging over the economy.
Large corporations are suspending guidance or, even worse, withdrawing guidance as their previous plans and forecasts were based on a set of economic conditions that no longer exist. Two-thirds of small businesses stated that the trade war will negatively impact their company, according to a survey commissioned by the Wall Street Journal.
66% of respondents to the University of Michigan’s Survey of Consumers said they expect an increase in unemployment over the next 12 months. 63% of respondents – the highest on record – believe the federal government is doing a poor job regarding economic policy.
The backlash from the business community, the drop in consumer sentiment and the possibility of empty shelves likely spurred the president to reach a trade deal with China sooner than many analysts expected. On May 12, both the United States and China agreed to lower their tariffs on each other’s exports for 90 days. It’s unclear if this pause in the trade war will permanently hold.
The whiplash that the current administration is giving to the economy makes financial planning for the future nearly impossible. The deal will push transport prices higher due to a jump in demand for imports, which will also push the US trade balance on goods higher. The surge in imports will also likely overwhelm west coast ports, which are not prepared to deal with large jumps in incoming shipments.
While the deal is a reprieve for an economy deeply concerned about price increases, uncertainty remains. The details of the 90-day deal announced Monday do not align with what President Trump has previously described as his definition of victory. Additionally, three months is a very long time for this chaotic administration to stick to any given plan.
Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.
Photo credit: Patrick Winzler via Pexels.
