US job openings surge, but hiring slows as economists warn labor market remains fragile
The U.S. labor market continued to display resilience in May, with private employers adding more jobs than expected and job openings climbing to their highest level in nearly a year. However, economists caution that beneath the headline gains, hiring remains subdued, worker confidence has weakened, and growing inflation pressures linked to the conflict in the Middle East could create new challenges for businesses and policymakers.
Private-sector payrolls increased by 122,000 jobs in May, according to payroll processor ADP, while separate government data showed a sharp rise in job openings during April. At the same time, hiring activity slowed, resignations fell to lockdowwn-era lows, and unemployment claims reached their highest level in four months.
Private-sector employment rose by 122,000 jobs in May, according to the ADP National Employment Report. The gain exceeded economist expectations and marked an improvement from April’s revised increase of 105,000 jobs.
The report suggested employers continued adding workers despite elevated inflation, geopolitical uncertainty, and concerns about slower economic growth. May’s increase represented the strongest pace of private-sector hiring since January.
ADP Chief Economist Nela Richardson said the labor market entered the summer hiring season with encouraging momentum.
“Hiring was more broad-based in May than we’ve seen in the last few years,” Richardson said. “The labor market continues to show sustained momentum going into the summer hiring season.”
Job growth spreads across industries
Unlike earlier months when hiring was concentrated in a handful of sectors, employment gains in May were distributed across much of the economy.
Education and health services led all industries with 57,000 new positions. Trade, transportation and utilities added 36,000 jobs, while construction and financial activities also posted gains.
Eight of the 10 major sectors tracked by ADP recorded employment growth during the month. However, information services as well as natural resources and mining continued to experience job losses.
The broader distribution of hiring provided some reassurance that labor demand remains relatively healthy despite concerns about rising costs and slowing consumer spending.
Businesses of all sizes contributed to May’s employment growth, but smaller firms led the way.
Companies with fewer than 50 employees added 67,000 jobs, while firms with 500 or more workers created 40,000 positions. Medium-sized businesses contributed 17,000 jobs.
The strongest gains came from the smallest employers. Firms with between one and 19 employees added 49,000 positions, suggesting smaller businesses remain willing to expand payrolls despite higher borrowing costs and economic uncertainty.
Still, Richardson noted that many newly created jobs are part-time positions, highlighting a potential area of concern.
“If I were to point to a small fly in the very solid ointment of the labor market, it is the kinds of jobs that are being created,” Richardson said. “We’re seeing the part-time share be over 40% — it’s actually 42% in May. That’s a higher share than we were tracking five years ago.”
Job openings surge to highest level since May 2024
Separate data from the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed labor demand strengthened significantly in April.
Job openings increased by 731,000 to 7.618 million, the largest monthly increase in five years and the highest level since May 2024. The job openings rate climbed to 4.6% from 4.2% in March.
The rise pushed the ratio of available jobs to unemployed workers to its strongest level since early 2025.
However, economists urged caution when interpreting the increase because most of the gains were concentrated in one industry.
Professional and business services accounted for roughly 91% of the increase in job openings during April.
Vacancies in the sector surged by 668,000, raising questions among economists about whether the increase reflected a genuine acceleration in hiring demand or statistical volatility.
“Sharp drops in openings in this sector in previous months have been revised away as more data have been collected,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “It is just as likely that April’s big increase in openings also proves illusory.”
Health care and social assistance also reported an increase in available positions, while finance and insurance experienced a decline in openings.
Hiring slows even as openings rise
While job openings increased sharply, actual hiring moved in the opposite direction.
Employers hired 5.116 million workers in April, down 419,000 from March. The decline was widespread across industries, including professional services, retail trade, transportation, finance, health care and hospitality.
The hiring rate fell to 3.2% from 3.5%, suggesting businesses remain cautious about expanding payrolls despite posting more openings.
Economists said the disconnect reinforces the view that the labor market remains in a “slow-hire, slow-fire” environment rather than entering a new period of rapid expansion.
Worker confidence weakens as quits fall
Another sign of labor market caution emerged from the quits rate, a closely watched measure of worker confidence.
Resignations dropped by 183,000 in April to 2.977 million, the lowest level since August 2020 during the height of the COVID-19 pandemic. The quits rate slipped to 1.9% from 2.0%.
When workers feel confident about employment opportunities, they are generally more willing to leave jobs voluntarily in pursuit of better opportunities. The decline suggests many employees are becoming more cautious.
“For now, the labor market remains mostly stable. With the quits rate and the layoff rate ticking down in April, neither employees nor employers are in a hurry to make moves,” said Matthew Martin, senior U.S. economist at Oxford Economics.
Despite slower hiring and weaker worker confidence, layoffs remain one of the labor market’s strongest pillars.
Layoffs and discharges declined by 192,000 in April to 1.692 million, while the layoffs rate fell to 1.1%.
Weekly unemployment claims increased to 225,000 during the week ending May 30, the highest level in four months. However, economists largely attributed the rise to seasonal factors surrounding the Memorial Day holiday rather than a significant deterioration in labor conditions.
“The big picture remains that the trend in both initial and continuing claims still is very subdued,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “It would be unwise, however, to conclude that all is fine and well with the labor market simply because claims are low. Low fire, low hire remains an apt description of labor market conditions.”
Middle East conflict adds inflation concerns
A growing concern for businesses and policymakers is the inflationary impact of the ongoing conflict involving Iran.
The Federal Reserve’s latest Beige Book reported that economic activity increased modestly in recent weeks while employment remained largely unchanged. The report noted that higher energy costs linked to the conflict were becoming a significant source of inflation pressure.
“Districts noted that energy-related costs tied to the conflict in the Middle East were the primary driver of inflationary pressures, with spillovers into shipping, packaging, groceries, and fertilizer,” the Fed said.
Economists warn that persistently higher energy prices could weaken consumer spending and discourage businesses from expanding hiring plans in the months ahead.
Productivity slows but AI remains a bright spot
Labor Department data also showed worker productivity growth slowed more than previously estimated during the first quarter.
Nonfarm productivity increased at a revised annualized rate of 0.3%, down from the initial estimate of 0.8% and marking the slowest pace since early 2025.
Despite the slowdown, productivity has continued to trend higher over the longer term, rising at an average annual rate of 2.1% since late 2019.
Many economists believe broader adoption of artificial intelligence will continue boosting productivity while helping businesses manage labor costs. Unit labor costs rose at a revised 1.8% annualized pace during the quarter, lower than previously estimated.
The labor market enters June with a mixed but generally stable outlook. Private payroll growth exceeded expectations, job openings surged, and layoffs remain historically low.
Yet hiring activity has weakened, workers appear less confident about changing jobs, and economists remain skeptical that recent gains signal a major acceleration in labor demand. Forecasts call for nonfarm payrolls to increase by roughly 85,000 jobs in May while the unemployment rate remains steady at 4.3%.
The upcoming Labor Department employment report will provide the most comprehensive assessment yet of whether the labor market is merely stabilizing or beginning to regain stronger momentum amid rising inflation pressures and uncertainty surrounding the Middle East conflict.
Like Financial Freedom Countdown content? Be sure to follow us!
14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing crucial income support during retirement. With inflation at its highest in four decades, Social Security’s inflation-adjusted benefits offer protection against rising costs.
Rising interest rates have disrupted many retirement portfolios, causing bond fund values to plummet. In this volatile financial landscape, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons you should claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefit. Financial planners usually advise delaying your claim for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with a full payout available at your full retirement age (FRA), which is currently between 66 and 67 depending on your birth year. Claiming before FRA results in a permanent reduction in your monthly benefit, while waiting beyond FRA leads to a permanent increase. However, the decision isn’t solely about maximizing the monthly check. Personal factors such as health, family circumstances, and financial needs can play a significant role in determining the right time to claim.
11 Reasons You Should Claim Social Security Early
Did you find this article helpful? We’d love to hear your thoughts! Leave a comment with the box on the left-hand side of the screen and share your thoughts.
Also, do you want to stay up-to-date on our latest content?
1. Follow us by clicking the [+ Follow] button above,
2. Give the article a Thumbs Up on the top-left side of the screen.
3. And lastly, if you think this information would benefit your friends and family, don’t hesitate to share it with them!
John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
Here are his recommended tools
Personal Capital: This is a free tool John uses to track his net worth on a regular basis and as a retirement planner. It also alerts him wrt hidden fees and has a budget tracker included.
Platforms like Yieldstreet provide investment options in art, legal, real estate, structured notes, venture capital, etc. They also have fixed-income portfolios spread across multiple asset classes with a single investment with low minimums of $10,000.
