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We’ve got some surprisingly positive news for U.S. stock market investors. Despite growing concerns about an economic slowdown—fueled largely by rising tariffs and global uncertainty—the latest jobs report has come in stronger than expected. The U.S. economy added 139,000 jobs in May, holding the unemployment rate steady at 4.2%, according to data released by the Bureau of Labor Statistics (BLS) on June 6, 2025.

Markets reacted immediately. The S&P 500 rose 1.18% during midday trading, the Dow Jones Industrial Average gained 1.1%, and the Nasdaq Composite led with a 1.41% increase. This reaction underscores the importance of labor market data in shaping expectations about the economy—and by extension, monetary policy, corporate earnings, and investor sentiment.

In this breakdown, I’ll walk you through:

1. What the May jobs report actually says,

2. Why the market celebrated the data,

3. The sectors that are driving job growth,

4. The hidden risks beneath the surface,

5. And what it all means for the U.S. economy and investors going forward.

1. A Resilient Headline: 139,000 Jobs Added, Unemployment Steady at 4.2%

First, let’s start with the basics.

The U.S. economy added 139,000 non-farm jobs in May. This was above consensus estimates and significantly better than what I had personally expected, especially in light of the economic shock introduced by the Liberation Day tariffs announced by President Donald Trump on April 2nd.

The unemployment rate remained unchanged at 4.2%, and the total number of unemployed individuals held steady at 7.2 million. These are individuals actively seeking work but who haven’t found a suitable position.

Now, a steady unemployment rate might seem neutral, but in this case, it's bullish. Why? Because the unemployment rate has been trending higher for over a year—rising from 3.6% in May 2023 to 4.2% today. Normally, such a steady rise would be a classic red flag. Historically, unemployment doesn't rise slowly and stop; once it begins trending upward, it's often a sign of an approaching recession.

But that hasn't happened here—at least, not yet. Instead, the data shows pockets of resilience, especially in key service sectors. And the flat reading on unemployment suggests the economy is adjusting rather than contracting—which is a critical distinction.

2. Why the Stock Market Loves This Jobs Report

So why did stocks surge? It’s not just that the jobs number beat expectations—it’s what it implies about the broader economic trajectory.

Markets were pricing in fear.

After the April tariffs, sentiment around the economy took a hit. Businesses began adjusting supply chains, cutting costs, and delaying capital expenditures. There was rising concern that this would lead to a slowdown in hiring—or even widespread layoffs.

Instead, this jobs report showed that the labor market is holding up. Employers are not hiring aggressively, but they’re also not firing people en masse, which suggests underlying demand remains intact.

This reduces the perceived risk of a near-term recession, which boosts risk appetite. That’s why all three major indexes surged.

3. Sector Breakdown: Where the Jobs Are Coming From

Let’s dig deeper into which sectors are driving the growth:

Healthcare: +62,000 Jobs

The healthcare sector was the standout performer, adding 62,000 jobs in May—well above its 12-month average of 44,000. Notably, healthcare is largely immune to tariff shocks, since it’s domestically focused and doesn’t rely heavily on imported goods.

This makes healthcare hiring a strong, stable foundation for job growth in times of economic uncertainty.

Leisure and Hospitality: +48,000 Jobs

Leisure and hospitality also saw robust gains, adding 48,000 jobs, primarily in food services and drinking establishments, which accounted for over 30,000 of those.

This trend is particularly important. As I’ve mentioned in previous videos, tariffs disproportionately increase the cost of goods, not services. So when consumers see a 30–50% jump in the cost of imported electronics, clothing, or furniture—but restaurant prices remain stable—their spending shifts toward experiences rather than products.

This makes services industries relatively more attractive post-tariffs, and that’s exactly what we’re seeing in the job numbers.

Federal Government: -22,000 Jobs

On the downside, the federal government shed 22,000 jobs in May and is down 59,000 year-to-date. This decline reflects a deliberate push to reduce government employment, aligned with initiatives by the Trump administration—and perhaps influenced by his recent political fallout with Elon Musk, which may affect certain federally backed tech programs.

However, it’s worth noting that these numbers may understate the true picture. Workers on paid leave or severance are still counted as employed. As those benefits expire in the coming months, we may see a further increase in unemployment, particularly in the public sector.

4. Underemployment, Participation, and Hidden Labor Pools

In addition to the headline numbers, there are several secondary indicators worth paying attention to:

• Part-time for economic reasons: This group stood at 4.6 million. These are individuals who want full-time work but can’t get the hours. In an improving labor market, these workers are often the first to see gains as businesses increase hours before hiring externally.

• Marginally attached workers: There are about 6 million people who aren’t actively looking for work but would accept a job if offered. These workers represent hidden labor supply that companies can tap into before resorting to raising wages dramatically.

5. Wage Growth and Hours Worked

Average hourly earnings rose 3.9% year-over-year, which is above the inflation rate. That means real wages are rising—translating to 1.5% growth in real purchasing power for the average American.

This is crucial for maintaining consumer spending. When real wages increase, consumers are more likely to maintain or increase discretionary purchases, which supports businesses and helps keep the economy humming.

The average workweek was unchanged at 34.3 hours—a somewhat short figure by historical standards but consistent with post-pandemic norms. It also suggests that while employers are not ramping up production aggressively, they’re not cutting back hours either, which is a positive sign.

6. Revisions to Prior Months

A minor downside in the report was that March and April employment figures were revised down by a combined 95,000 jobs. These types of revisions are standard with BLS reports and are based on more complete data. While not ideal, downward revisions are not unusual and don’t significantly alter the positive tone of the May report.

7. The Bigger Picture: What This Means for the Economy and Markets

The May jobs report is a welcome surprise. It shows that the economy—while facing genuine headwinds from trade policy—isn’t cracking under the pressure. It may be bending, but it’s still fundamentally strong.

For investors, this has two major implications:

1. The risk of a recession has decreased, at least in the near term. This could lead to stronger earnings for companies in service-oriented sectors and support current equity valuations.

2. Monetary policy expectations may shift. If the labor market remains resilient, the Federal Reserve may feel less pressure to cut interest rates in the short term. That could stabilize bond yields and support risk-on positioning in equity markets.

Final Thoughts: A Strong Report with One Caveat

To summarize, the May jobs report was much better than expected. It suggests that the U.S. economy is adapting—not collapsing—in the face of rising tariffs and geopolitical risk.

Yes, there are still concerns:

• Government layoffs may increase in the coming months.

• Part-time and underemployed workers still represent untapped potential.

• Revisions to past data show softness beneath the surface.

But overall, this report reduces my probability estimate of a U.S. recession in 2025. It gives investors a reason to stay invested, particularly in service-oriented sectors like healthcare, leisure, and food service, which are benefiting from structural shifts in consumer behavior post-tariffs.

This was a positive signal—and one that stock market investors should be glad to see.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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