The job market holds up — for now

Article originally posted on CoStar on May 8, 2025

The American job market surpassed expectations in April, sending stocks soaring while pushing economists’ expectations for Federal Reserve interest rate cuts later into the year.

Beyond the headline numbers, though, signs of softening emerged, as job growth related to tariff front-loading is likely to prove fleeting, and more up-to-date data solidifies the picture of an increasingly frozen market for new hires.

Employers added 177,000 new jobs in April, according to the Bureau of Labor Statistics’ latest monthly report. Moreover, despite downward revisions removing 58,000 jobs from the February and March reports, the three-month moving average of job growth rose to 155,000, better than expected. The unemployment rate remained at 4.2%.

Of all jobs added, only 11,000 were in goods-producing sectors, and all were in the construction industry. In comparison, service-producing industries added 156,000 jobs, with healthcare and private education services contributing the largest share of growth, adding 70,000 total jobs. Other industries oriented to consumer spending continued to reverse losses from earlier in the year. Accommodation and food services added 21,000 new jobs, the industry’s second month of job growth after losses in January and February.

Meanwhile, transportation and warehousing added 29,000 jobs in April, more than double the industry’s monthly average job growth through 2024. Though the sector added more than 30,000 jobs in December, looking at the subsectors driving growth shows a meaningful shift.

The courier and messenger subsector, consisting of small, local parcel delivery services and private document couriers, accounted for nearly 60% of job growth in the transportation and warehousing industry in 2024.

That began to shift in March and into April. Though the overall industry added a net of 2,700 jobs in March, truck transportation operators ramped up hiring at their fastest rate in nearly three years, adding 7,000 trucking jobs, coinciding with a 5% monthly increase in goods imports.

Trucking job growth continued through April but slowed to about 1,400 additional jobs. At the same time, demand for workers in warehousing and storage increased as retailer and manufacturer inventories swelled. Employers added 9,800 warehousing and storage jobs in April, the subsector’s largest increase in two years.

The subsector has added more than 16,000 warehousing and storage jobs since February, compared to net growth of only 1,600 jobs in the year before.

However, this trend is likely to prove temporary. Market participants and survey data show shipments are slowing, and new orders from retailers and manufacturers began in April. Some trucking companies have announced layoffs as demand for shipments thins.

While the jobs report covers conditions as they were the week of April 12, more recent data shows an uptick in initial unemployment claims to 241,000 the week ending April 26 from 216,000 the week ending April 12. More troublesome, continuing unemployment claims jumped to 1.9 million the week ending April 19, their highest level since November 2021.

The April jobs report found little impact of the announced cuts to the federal workforce, with federal job counts cut by 9,000 positions in April. However, these are likely to accelerate in the coming months, given the required 60-day notice to non-probationary federal workers whose positions were eliminated beginning in March.

The threats of tariffs and front-loading of imports in advance of the levies impacted not only the labor market but also the national accounts. The Commerce Department reported that the economy contracted in the first quarter of the year by 0.3% at a seasonally adjusted annualized rate, its first negative print in three years. That was a far cry from what had been expected to be a continuation of the solid growth seen in the final quarter of last year.

The surge of imports was the main drag on economic growth as it initially counts as a subtraction from growth. Still, the underlying data showed the domestic economy to be in good shape for now as inflation-adjusted consumer spending expanded.

The future is cloudy, however, with business investment and expansion at risk from elevated levels of uncertainty and higher input costs. As profit margins narrow, layoffs may easily follow, risking a period of slower growth that could bring an end to the current expansion.