U.S. Job Market Pushes Past Shocks and Strains

The labor market has shifted into a higher gear, powering through an energy shock and immigration restrictions to pull more people into work even as consumers sour on an economy that is straining their wallets.

The vigorous pace of hiring over the past few months is a reversal from the stagnation of 2025, a year of unpredictability and dislocation that led businesses to put hiring plans on ice. And yet, Americans remain in a foul state of mind as wages fail to keep pace with surging prices for gasoline and food.

Employers added 172,000 jobs in May, blowing past expectations, while the unemployment rate remained at 4.3 percent for the third month in a row. With upward revisions to the previous two months, the economy has packed on 114,000 jobs per month on average this year, up from only 10,000 in 2025.

The consecutive months of strong growth, with no signs of increasing layoffs, are evidence that businesses have shaken off a period of paralysis last year — a hangover from a hiring binge after the Covid-19 pandemic and wild swings in policy from the Trump administration.

“People look ahead, they see all the growth that’s going to come years from now, and it’s making them feel wealthier, so they spend. It’s making them feel more optimistic, so they invest,” said James Egelhof, chief U.S. economist for the financial services company BNP Paribas. “We think that’s translating into a pickup in labor demand.”

Tax breaks enacted in 2026 as well as the artificial intelligence investment boom have fueled a sense that it might finally be time to splurge, Mr. Egelhof said.

Earlier this year, forecasts had been much more dour, mostly because the White House’s campaign against legal and illegal immigration had depressed labor force growth to near zero. Immigration enforcement surges also took a toll on job creation in targeted cities, a report from the Brookings Institution found.

But the Supreme Court’s decision to rein in President Trump’s power to wield tariffs, which has resulted in billions of dollars in tariff refunds, restored some confidence to the private sector. Departures from the federal government have largely ceased, after 325,000 jobs disappeared in the first year of Mr. Trump’s second term. Even with immigration at a low ebb, labor force participation for workers between 25 and 54 has remained high, ticking up to 83.9 percent.

And the surge in gasoline prices from the U.S. and Israeli attacks on Iran does not appear to have made a dent in job creation. The Federal Reserve Bank of Boston released an analysis this week arguing that the American economy was much more resilient to energy price increases than it had been decades ago since many jobs now depend on oil and gas production.

“We can’t say that we’re out of the window of vulnerability, because of the spillover effects from the war,” said Nancy Vanden Houten, lead U.S. economist with Oxford Economics. “But so far the labor market has more than held its own despite more than three months of this conflict.”

The strength in job creation stands in contrast to consumers’ extremely downbeat mood. The long-running University of Michigan consumer sentiment survey measured the worst reading in its history in April, especially for people in the bottom third of the income distribution. And in opinion polls, voters have turned against Mr. Trump’s handling of inflation and prices.

The jobs report that the Labor Department published on Friday included one clue that might explain the pessimism: Growth in average hourly earnings fell to 3.4 percent over a year earlier, a hair ahead of the rate in March, which was the slowest since September 2021. With prices growing 3.8 percent over the past year, consumers are now losing ground and have been digging deeper into their savings to pay for necessities.

Also, very few people are quitting their jobs to get another one, which tends to be the easiest way to get a raise. For those out of work, getting a job remains difficult; the share of unemployed Americans who have been job hunting for more than 27 weeks is at its highest since 2016.

Weaker wage increases may also be a consequence of the composition of job growth in recent months. Leisure and hospitality led the gains in May, adding 70,000 positions, possibly in part because of hiring ahead of a flood of tourists expected for the FIFA World Cup that starts this month. Those jobs have the lowest hourly wage rates out of all major sectors.

The other big driver was local government, which added 55,000 jobs, along with construction, which has been trending up since last fall amid a massive buildup in data centers to serve the A.I. boom. Adam Schickling, an economist with Vanguard, thinks the unseasonably warm spring may have also played a role jump-starting hiring in fields dependent on weather changes.

“That is essentially something you ultimately pay back in one form or another. You’re hiring people earlier, so then you’re not hiring that person later,” he said. “I think it’s still really early to suggest that there’s a reacceleration in the labor market.”

Nevertheless, job gains were comparatively widespread, after a few years of mostly leaning on health care employment powered by the needs of an aging population. Even staffing services have been expanding this year after a three-year slide, a sign that employers are bringing on some extra hands to accommodate more work.

That uptick in demand is likely coming from the manufacturing industry, where a closely-watched survey released last month found that the industry has expanded for five months in a row. The sector lost 323,000 jobs in 2024 and 2025, but seems to have stabilized.

Improving prospects for manufacturers likely won’t turn into a jobs boom, though.

Bob Teska runs Dalen Products, a family-owned producer of garden products in Knoxville, Tenn. He brought more production back to the United States from China to mitigate the cost of tariffs, only to face increased costs for plastic with the Middle East war disrupting shipping.

To increase production of the company’s owl decoys, which are meant to scare off birds, Mr. Teska has bought a new blow molding machine and an automatic painting robot. He has between 40 and 50 employees, depending on the season, and thinks he can stay at about that level by training everyone to do different tasks now that fewer jobs require years of expertise.

“I’m not looking to reduce head count. We’re looking to be more efficient,” Mr. Teska said. “That blow molder is replacing one that’s 40 years old, and has the ability to double our output of owls.”

There is evidence that a new form of automation — A.I. — may be affecting employment at tech companies. Job losses have accelerated in the information sector, dropping from a peak in 2022. But it’s possible those displaced workers have found new homes in the many white-collar fields in the professional and business services category, which has been rebounding.

“You do hear about a lot of layoffs in some companies, and they quote A.I. as being a motivating factor,” said Christine Cooper, chief U.S. economist and a managing director for the real estate data firm CoStar. “They might just have moved into consulting for companies that want to adopt A.I.”

The labor market turnaround may even have reached the creative professions in Hollywood, which experienced a generational slump over the past few years after a pullback in spending by the big studios, major labor strikes and devastating wildfires.

Austen Marr had been just about to give up on his career as a set designer for animated children’s shows, which had gotten off to a great start after graduating from art school in 2019. As the number of new shows dried up, so did his commissions. He started teaching and selling vintage clothing to keep up with bills and student loans, and was thinking of leaving Los Angeles.

Then, a few weeks ago, he landed a contract with a YouTube show that will last for two and a half years — just not at the union wage rate he used to make, or with the health insurance.

“It’s not an ideal situation, but just the fact that I have employment is very lucky,” Mr. Marr, 30, said. “I look at what I’ve gone through in animation, and what my peers have gone through, and I’m like, ‘Geez, is this really enough to make a life out of?’ I do question it.”