The latest employment report showed that 172,000 jobs were added in May, more than double the projected addition of 85,000 jobs. Additionally, jobs gains for the previous two months were revised upwards, with April's figure now at 179,000 and March's at 214,000. Meanwhile, the unemployment rate remained at 4.3%, as expected.
Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
Total nonfarm payroll employment increased by 172,000 in May, and the unemployment rate was unchanged at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, local government, and health care. Employment in financial activities declined.
Household Survey Data: The major labor market indicators from the survey of households continued to show little or no change in May. The unemployment rate held at 4.3 percent and has remained in a narrow range of 4.3 percent to 4.5 percent since July 2025. The number of unemployed people, at 7.3 million, changed little over the month.
Establishment Survey Data: Total nonfarm payroll employment increased by 172,000 in May, similar to the gain of 179,000 in April. In May, job gains occurred in leisure and hospitality, local government, and health care. Employment in financial activities declined.
Here is a snapshot of the monthly change in nonfarm employment over the last five years. The 3-month moving average is currently at 188,000, the highest level in over two years.
For another view, here is the monthly percent change in nonfarm employment since 2000. We've added a 12-month moving average to highlight the long-term trend. The latest 12-month moving average is at 42,000.
Unemployment, Recessions, and Market Trends
The next chart illustrates the relationship between unemployment, recessions, and the S&P Composite since 1948. Unemployment is typically a lagging indicator that moves inversely to equity prices (the top series in the chart). Notice the rising unemployment peaks in 1971, 1975, and 1982, which coincided with bear markets. A similar pattern briefly emerged during the COVID pandemic, but the impact was short-lived as irrational exuberance quickly took over. The latest unemployment rate stands at 4.296% (to three decimal places).
Now, let's examine the unemployment rate as a recession indicator—specifically, the cyclical troughs in the unemployment rate (UR). The next chart highlights a 12-month moving average of the UR, with its troughs marked.
Currently, the unemployment rate stands at 4.30%, just above the latest 12-month moving average of 4.33%. As shown in the inset table, the correlation between these moving average troughs and the start of recessions is remarkably strong. The most recent trough occurred 35 months ago, in June 2023, when the 12-month moving average of the unemployment rate fell to its lowest level since January 1970.
The next chart highlights the unemployment rate for those unemployed for 27 weeks or more. This rate has declined significantly from its all-time peak of 4.4% in April 2010. Following the COVID pandemic, it rose as high as 2.6% but quickly fell. This rate has recently been trending upwards and now stands at 1.2%, the highest level since December 2021.
How long does unemployment typically last? As the next chart shows, the latest data indicates that the average duration of unemployment is 26.0 weeks, the highest level since February 2022. Historically, this metric tends to rise during and after recessions.
The Bureau of Labor Statistics’ broadest measure of unemployment, the U6 series, captures not only the unemployed but also the underemployed, marginally attached workers, and those who have stopped looking for work. Often referred to as the 'real' unemployment rate, many economists consider it the most comprehensive gauge of labor market conditions. In contrast, the more widely cited unemployment rate only includes those who are unemployed and actively job-seeking within the past four weeks. The U6 series currently stands at 8.1%, down from 8.2% the previous month.
