Friday’s jobs report could show how much US employers will bend before they break

Last June, after almost a full year on the job hunt, Jordan Williams landed a role at a high-growth, United Kingdom-based outdoor apparel brand that was looking to build out its US operations.

Passenger Clothing was well-positioned for expansion: The company landed orders with REI, Scheels and others, and Williams, an outdoor industry veteran, was excited for the ride.

Until April.

“Upon Liberation Day,” Williams said, nodding to the moniker President Donald Trump assigned to his blowout tariff announcement on April 2, “I was liberated from employment.”

Overnight, the US went from being Passenger’s biggest potential growth driver to its biggest existential threat. For every $1 million of recycled fabrics, organic clothing and other products that landed in the US from countries such as India and China, Passenger was responsible for an additional $500,000 of duties, the company said in a mid-April statement announcing the pause of its US operations.

Williams officially lost his job on April 11.

Economists have warned early layoffs like Williams’ could be the first signs of labor market fallout from Trump’s steep (and shifting) tariffs, which have ramped up uncertainty testing the nimbleness of businesses of all sizes.

Friday’s jobs report will provide some hints as to how much US employers are able to bend before they break.

“The labor market is good, but it’s not exceptional, and we’re in the process of putting some real strain on the economy,” Claudia Sahm, New Century Advisors chief economist, told CNN in an interview.

Economists expect that the May jobs report, slated for release Friday morning, could show the labor market is softening. The consensus forecast is for the economy to have added 130,000 jobs, slowing from a stronger-than-expected 177,000 gain in April, and for the unemployment rate to hold at 4.2% for the third consecutive month, according to FactSet estimates.

Hesitation on the hiring front

The Labor Department’s weekly jobless claims report has shown higher numbers of first-time claims last month as well as people who have remained on unemployment for multiple weeks.

Continuing claims, which are filed by people who have received unemployment insurance for at least a week or more, continue to bump up against a three-and-a-half-year high.

“This is a market where there are stops and starts, and there are pullbacks in hiring,” Nela Richardson, chief economist for payroll giant ADP, said Wednesday “With establishments, especially small establishments, when there’s a lot of uncertainty — it doesn’t mean that the demand isn’t there but the timing may be off — and firms would rather wait and see than hire aggressively.”

The hiring rate, the number of hires as a percentage of total employment, ticked higher in April to 3.5% but remains below pre-pandemic levels, according to Bureau of Labor Statistics data released earlier this week.

And by ADP’s count (which doesn’t always correlate with the official jobs report) hiring dropped off precipitously in April and May, when the private sector gained 60,000 and 37,000 jobs, respectively.

“The weak numbers we’re seeing now does not point to a labor market that’s collapsing, but there is hiring hesitancy,” Richardson said Wednesday.

“It’s like driving through fog for some of our firms here,” she added.

Federal workforce hit the hardest by job cuts

Though the ripple effects from various Trump policies could take longer to show up in the data, the federal workforce reductions have already started appearing. The federal government posted job losses for three consecutive months, dropping 13,000 jobs in February, 4,000 in March and 9,000 in April, BLS data shows.

More losses could be spread over many months to come: Not all federal workers were laid off immediately, and other actions are being challenged in court.

Through May, announced job cuts are running significantly higher than in recent years; however, the lion’s share of the cutbacks have come from the federal government.

Department of Government Efficiency-related cost-cutting and its downstream effects have led to more than 294,000 announced job cuts, according to Challenger, Gray & Christmas data released Thursday. Another 131,257 announced cuts have been attributed to “market/economic conditions,” while 2,097 have been directly tied to tariffs.

“Tariffs, funding cuts, consumer spending, and overall economic pessimism are putting intense pressure on companies’ workforces,” Andrew Challenger, senior vice president of the outplacement and coaching firm, said in a statement. “Companies are spending less, slowing hiring, and sending layoff notices.”

DOGE’s actions and economic uncertainty have driven job cut announcements significantly higher than last year: Through the first five months of the year, employers have announced 696,309 job cuts, an 80% increase from the comparable year-ago period, according to the Challenger report.

Despite the increase in announcements, layoffs appear to be shrinking. In May, employers announced 93,816 job cuts, a decrease of 12% from April.

Also, jobless claims (a proxy for layoffs) and the rate of layoffs and discharges remain below pre-pandemic levels, Labor Department data shows.

Still, the impacts from tariffs might very well by a slow burn, economist Claudia Saum said.

“We are still early days,” she said.