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The pace of job creation in the US is cooling, as shifting trade policies, rising business costs and a sharp drop in corporate profits weigh on labour market momentum, according to Bloomberg reports.

Employers added an estimated 125,000 jobs in May, a decline from the average 162,000 payroll additions over the past three months, as per a Bloomberg median forecast. The unemployment rate is expected to hold at 4.2 per cent, reflecting a stable but softening labour environment.

“Our preliminary forecast range for May nonfarm payrolls is 60,000–130,000, with the central tendency clustering around 90,000 – lower than the consensus of 130,000,” Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins wrote in a note.

They added that the weakness is likely concentrated in the leisure and hospitality sector, due to reduced international tourism and government travel.

According to the US Commerce Department, corporate profits fell by 118.1 billion dollars in the first quarter of 2025 – the steepest decline since the onset of the pandemic in 2020. As per Reuters, this profit contraction is being largely blamed on higher input costs, driven by President Donald Trump’s escalating trade tariffs.

On 30 May, Trump announced plans to double steel and aluminium tariffs to 50 per cent from the existing 25 per cent, in a bid to pressure global producers and reduce the trade deficit. The move has sparked backlash from the European Commission, which called it a violation of fair trade and warned of countermeasures.

“Employers seeking clarity around the White House’s trade policy have instead been greeted with frequent adjustments to timelines and import duty schedules,” Bloomberg noted, adding that this has left businesses hesitant to commit to fresh investments.

As businesses tighten costs amid profit pressures, signs of softening labour demand are becoming more visible. Initial jobless claims rose by 14,000 to 240,000 for the week ending 24 May, higher than expected, while continuing claims climbed to 1.92 million, the highest since November 2021, according to Reuters.

The Federal Reserve has kept rates steady at 4.25–4.50 per cent since December 2024, as officials await more consistent economic signals. Fed Chair Jerome Powell has emphasised that the central bank will take a “data-dependent approach,” noting risks on both inflation and employment fronts.

“Federal Reserve officials are likely to take the labour market reports in stride as they too await clarity on how trade and tax policy will impact the economy and inflation,” Bloomberg reported.

Investors will watch closely for comments this week from Fed Governors Lisa Cook, Adriana Kugler, and Christopher Waller, as well as the release of the Fed’s Beige Book on anecdotal economic conditions across districts.

The economic slowdown is further evidenced by revised GDP figures. As per the Commerce Department, US GDP contracted by 0.2 per cent in the first quarter, slightly better than the earlier -0.3 per cent estimate.

The contraction reflects a 42.6 per cent spike in imports, as companies rushed purchases ahead of expected tariffs. However, inventories and consumer spending failed to keep pace, leading to a net drag on growth.

“Concerned that revenue will suffer, companies are growing more conscious about cost-saving efforts that risk culminating in slower labour demand,” Bloomberg observed.