Markets tend to focus on one “hot topic” per week – and this week, jobs took center stage.

As you know by now, the Federal Reserve Bank in the US has a dual mandate – meaning it has to balance two priorities as it considers interest rate levels and monetary policy. That dual mandate includes 1) stable prices (ie: inflation) and 2) full employment (ie: labor market/jobs).

The Federal Reserve has been under pressure to lower interest rates this year from a variety of constituents, not the least of whom is President Trump. Why is there a push for lower rates? Lower interest rates tend to spur economic growth – as people and businesses are more apt to borrow and spend when money is cheaper. However, the Fed has remained hesitant to cut rates in 2025, primarily due to the inflation side of the equation. Inflation has moderated somewhat but remains above the Fed’s targeted 2% level and is at risk of reignition if tariffs take hold at broadcasted levels. As long as the job market is stable, concerns over inflation will likely keep rate cuts on hold. Hence the focus on any jobs data in recent weeks – as it seems any cracks in the labor market will give the Federal Reserve the “cover” it needs to lower rates.

This week brought two reports so far (with one more on tap for Friday after this is published).

On Tuesday, the JOLTS report (which analyzes job openings) revealed an unexpected pick up in job openings. Posted job openings reached 7.4 million (above the anticipated 7.1 million). Hirings were stronger than expected – but layoffs also rose. Quits (indication of “job hopping”) came down. All of this seems to show some slowing/normalization in the job market after a few years of a very strong labor market.

The ADP payroll report for May was also released. That report of private payrolls showed a 37,000 job increase in May – well below April’s 60,000 increase and the forecast of 110,000 – and the lowest monthly job count in over two years.

The non-farms payroll report for May (again, set to be released on Friday June 6th) is expected to show a larger increase of 130,000 (which is below the 177,000 in April).

It’s important to note that ADP and the non-farm payroll report tend to differ, occasionally by large margins, leading many to discount the ADP report. Nonetheless, it’s another snapshot of the jobs market and a potential indicator that weaknesses are appearing.

A look at the data within the ADP report is instructive – with losses in mining, manufacturing, professional/business services, and education and health services and increases in leisure & hospitality and financial activities. Majority of the losses were amongst smaller businesses (50 or fewer employees).

If the JOLTS and ADP report are to be given weight, it could be argued that the labor market is starting to soften. It’s not too hard to fathom that given some of the uncertainty surrounding tariff policy companies may have needed to make staffing changes as well. It’s only one month and things are changing by the minute. But one thing is highly likely – attention will remain on the labor market for the foreseeable future.

Onward we go,