By Martin Baccardax

Wall Street is bracing for a series of labor-market data releases this week, including the government's benchmark reading for May job gains, as investors look through tariff-related headlines and into the true effects of President Donald Trump's economic strategy.

The labor market, surprisingly resilient since the start of the year, is likely to to remain one of the key factors supporting the economy's performance over the coming months, while also guiding the Federal Reserve's near-term interest rate policy. It could also act as the lens through which investors judge the impact of Trump's trade and tariff policies.

The Bureau of Labor Statistics will kick things off Tuesday with its reading of job openings and labor turnover for the month of April, also known as the JOLTS report. Economists expect the update, which is closely tracked by the Fed, to show unfilled positions fall to around 7.1 million, a level that would match readings just before the Covid-19 pandemic in 2020.

The payroll processing group ADP will follow on Wednesday with its National Employment report, which will detail hiring in the private sector in May. The headline reading is expected to show a modest uptick from April's increase of 62,000 jobs, but analysts will also track the report's data on wage gains for workers both remaining in their positions and gaining new employment.

Those figures, matched against an ongoing increase in continued claims for unemployment benefit claims, which suggest finding a new role is taking the longest in three years, will offer clues as to the pace of hiring from private sector companies into the summer months

That could prove crucial for an economy that is battling uncertainty about tariffs, given policy shifts by the White House. Growth in gross domestic product is expected to be boosted by slumping imports after taking a hit earlier in the year, when companies rushed to bring in goods from overseas before the tariffs took effect.

"Firms likely paused the hiring of trade & transportation workers (over the month of May) but given elevated uncertainty about the steady state on tariffs, we don't think they would have already started shedding workers," Bank of America global economist Antonio Gabriel said in a note published Monday.

Thursday brings twin reports on the job market, including the Labor Department's weekly tally of Americans' filing first-time unemployment claims. That figure, while largely benign over the spring months, is starting to creep higher, and was last pegged at 240,000.

Challenger Gray & Christmas will also publish its monthly reading of corporate and government layoffs for the month of March, which are also on the rise. Last month, the outplacement group's report indicated year-to-date layoffs of just over 602,000, the highest in five years and an 87% increase from the same period in 2024.

Government job cuts, the report said, comprised nearly 47% of overall layoffs this year, the vast majority of them tied to Elon Musk's cost-cutting effort, the Department of Government Efficiency.

The market's headline nonfarm payroll report arrives on Friday. Investors are looking for an overall net hiring gain of 130,000, the lowest since February, with unemployment holding at 4.2%.

Broader labor market strength, however, is likely to push bets on the first Fed rate cut of the year further into the autumn. At present, the CME Group's FedWatch Tool shows 56% odds of a quarter-point cut in the fed funds rate in in September. That would be the first rate cut of the year.

Federal Reserve Gov. Christopher Waller, in fact, said in a speech delivered Monday in South Korea that both the solid labor market and modestly easing inflation pressures allowed him "additional time to see how trade negotiations play out and the economy evolves" before deciding his next vote on rates.

"I see downside risks to economic activity and employment and upside risks to inflation in the second half of 2025, but how these risks evolve is strongly tied to how trade policy evolves," he said.

Write to Martin Baccardax at martin.baccardax@barrons.com

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June 02, 2025 09:03 ET (13:03 GMT)

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