Hiring Is Slowing Despite More Job Openings. Here’s Why Tariffs Are to Blame
The U.S. labor market is sending mixed signals in mid-2025. Job openings are rising, but hiring is slowing down. This unexpected trend has economists and businesses scratching their heads.
According to the latest Job Openings and Labor Turnover Survey (JOLTS), employers had 7.4 million jobs open in April 2025. This is up from 7.2 million in March. But despite the abundance of opportunities, hiring has dropped significantly.
The Paradox in the Labor Market
Experts point to one major culprit: tariffs. Trade tensions are creating uncertainty, causing businesses to hesitate. “When it comes to hiring, there’s a hesitancy because of a wide level of uncertainty,” said ADP chief economist Nela Richardson.
RBC Capital Markets economist Carrie Freestone added, “We’re in a situation now where businesses are facing a level of paralysis. Nobody is wanting to ramp up hiring when they don’t know what’s going to happen down the line.”
The May Jobs Report: A Glimpse into the Economy’s Health
The Bureau of Labor Statistics is set to release its May 2025 employment report. Economists expect around 125,000 jobs added, down from April’s 177,000. Some forecasts are slightly higher, at 130,000 new nonfarm payroll jobs.
Private sector data tells a similar story. ADP reported only 37,000 jobs added in May, the lowest in over two years. This slowdown suggests the official numbers may also disappoint.
Goldman Sachs analysts noted, “Elevated uncertainty is likely to disproportionately weigh on employment growth in months when gross hiring is particularly elevated, such as May.”
The Ripple Effects of Hiring Hesitation
The slowdown is having broader impacts. Workers are staying unemployed longer. The Department of Labor reported 1.904 million continuing unemployment claims in late May, near the highest level since November 2021.
This puts pressure on the Federal Reserve. Some analysts suggest the Fed may cut interest rates to prevent mass layoffs if the labor market weakens further.
Looking Ahead
Richardson compared the situation to “driving through fog.” Businesses are moving forward but cautiously. The big question is whether this economic uncertainty will clear or worsen.
Today’s jobs report will provide critical insights. It will show how much tariffs are affecting the employment outlook as summer 2025 approaches. The findings will likely influence market sentiment and policy decisions in the coming months.
May Jobs Report: What to Expect and the Role of the Federal Reserve
The May jobs report, set to be released by the Bureau of Labor Statistics, is anticipated to reveal a slowdown in job creation. Economists predict approximately 125,000 jobs added in May, a notable decrease from April’s 177,000. Some forecasts suggest a slightly higher figure of 130,000 new nonfarm payroll jobs, but overall expectations remain subdued.
The private sector has already shown signs of a significant slowdown, with ADP reporting only 37,000 jobs added in May—the lowest in over two years. This data indicates that the official BLS numbers may also reflect a similar trend, raising concerns about the labor market’s resilience.
The Role of the Federal Reserve and Policy Implications
The weakening labor market data is putting additional pressure on the Federal Reserve. Some analysts suggest that if the labor market continues to deteriorate, the Fed may consider cutting interest rates to preempt more severe economic consequences, such as mass layoffs. This potential policy shift underscores the delicate balance the Fed must maintain to support economic stability.
Tariffs and Their Impact on Specific Industries
Beyond the general uncertainty, tariffs are having a disproportionate impact on certain industries. Manufacturing and retail sectors, heavily reliant on international trade, are experiencing heightened uncertainty. This has led to delayed investments and hiring freezes, as businesses await clarity on trade policies.
Goldman Sachs analysts have highlighted that “Elevated uncertainty is likely to disproportionately weigh on employment growth in months when gross hiring is particularly elevated, such as May.” This observation aligns with the current slowdown, suggesting that the effects of tariffs are not uniform across all sectors.
Broader Labor Market Implications
The slowdown in hiring is leading to an increase in part-time workers and a rise in unemployment claims. Workers are staying unemployed for longer periods, with the Department of Labor reporting 1.904 million continuing unemployment benefits in late May, nearing the highest level since November 2021. This trend indicates that the labor market is not merely experiencing a hiring pause but a more profound shift in employment dynamics.
As the labor market shows signs of strain, the Federal Reserve is under increasing scrutiny. The potential for interest rate cuts looms as a tool to stimulate economic activity and prevent further deterioration in the job market. The interplay between trade policy, business confidence, and employment growth remains a critical area of focus for policymakers.
Conclusion
The U.S. labor market in mid-2025 presents a complex picture, with rising job openings yet slowing hiring rates. Tariffs and trade uncertainty have emerged as significant factors, causing businesses to hesitate in expanding their workforce. The May jobs report, alongside private sector data, underscores this trend, with economists predicting a notable slowdown in job creation.
The Federal Reserve faces increasing pressure to respond to these developments, with potential interest rate cuts on the horizon to support economic stability. As the labor market navigates this uncertain landscape, the interplay between trade policy, business confidence, and employment growth remains a critical focus for policymakers and economists alike.
FAQ
Why is hiring slowing down despite more job openings?
Hiring is slowing due to economic uncertainty, particularly from tariffs and trade tensions. Businesses are hesitant to expand their workforces amid unpredictable conditions.
What role are tariffs playing in the hiring slowdown?
Tariffs are creating uncertainty, leading to delayed investments and hiring freezes. Industries like manufacturing and retail, which rely heavily on international trade, are disproportionately affected.
How might the Federal Reserve respond to the labor market slowdown?
The Federal Reserve may consider cutting interest rates to stimulate economic activity and prevent further deterioration in the job market if the labor market weakens further.
What industries are most impacted by the hiring slowdown?
Manufacturing and retail sectors are experiencing heightened uncertainty due to their reliance on international trade, leading to delayed investments and hiring freezes.
What does the May jobs report indicate about the economy?
The May jobs report is expected to show a slowdown in job creation, with economists predicting around 125,000-130,000 new jobs. This reflects broader economic uncertainty and the impact of tariffs on employment growth.