U.S. Job Market Adds 147,000 Jobs, Unemployment Drops to 4.1%

In a surprising turn of events, the U.S. job market defied expectations last month, adding 147,000 jobs despite federal cuts and other economic uncertainties. The unemployment rate decreased to 4.1%, indicating a stable job market. Economists had anticipated around 120,000 new jobs, but the actual figures exceeded these predictions. The gains were primarily driven by hiring in health care, state government, and public education sectors. Federal employment, however, saw a decline of 7,000 jobs last month, continuing a downward trend since January due to efforts to reduce the administrative state.

Analysts noted that the uncertainty surrounding tariffs and trade policies did not deter businesses from hiring. Jeffrey Roach, chief economist at LPL Financial, highlighted that businesses have not been spooked into shedding workers despite the economic fog. Wage growth, however, slowed down with average hourly earnings increasing at a 3.7% annual rate, and wages for non-managerial workers growing at 3.9%. This wage growth, while positive for workers, reduces the likelihood of an interest rate cut by the Federal Reserve at its next policy meeting, which has been a point of pressure from President Donald Trump.

The job market has cooled significantly from its peak in 2021-2023 when companies were desperate for workers. This year, employers have added an average of 124,000 jobs per month, a decrease from 168,000 in 2024 and an average of 400,000 from 2021 through 2023. Eric Winograd, chief U.S. economist at AllianceBernstein, described the job market as having moved sideways for the last six months, with the unemployment rate stabilizing between 4% and 4.25%. He noted that the market is in a state of equilibrium with a low unemployment rate, steady hiring, and abating wage pressures.

Despite the positive outlook, there are signs of underlying strain in the job market. The number of long-term unemployed individuals increased by 190,000 last month, and the number of people who wanted to work but were not counted as unemployed rose by 234,000. The erratic implementation of tariffs has left businesses bewildered and frustrated, with manufacturers expressing reluctance to make decisions due to the unpredictability of tariff policies. Susan Spence, chair of the Institute for Supply Management’s manufacturing survey committee, emphasized the need for stability in tariff policies to avoid further economic uncertainty.