Did the May non-farm payrolls bring relief? Economists warn: The impact of tariffs will not truly manifest until July and August

Last Friday, Eastern Time, the latest non-farm payrolls report released by the US Bureau of Labor Statistics brought relief to Wall Street.

The report showed that the seasonally adjusted non-farm payrolls in the US in May reached 139,000. Although this marked the lowest level since February, it was still higher than the market expectation of 130,000. Meanwhile, the US unemployment rate remained at 4.2% for the third consecutive month, which also eased concerns that the labour market was beginning to slow down significantly.

However, US economists warned that the impact of Trump's tariffs on US employment may not truly manifest until July or August. Therefore, it may be too early for Wall Street and the US Fed to let their guard down.

It's too early to relax now.

As early as last Thursday, Eastern Time, Joe Brusuelas, chief economist at RSM, wrote in his report: "We believe it is too early for the (May non-farm) employment report to reflect the negative impact of trade policies.This impact will only be fully reflected in the employment reports for July and August."

Although US President Trump announced global tariff policies as early as on "Liberation Day" (April 2), due to the frequent changes in Trump's trade policies and the delays caused by economic transmission, the far-reaching impact of tariffs on the US economy and job market may not be fully felt until midsummer.

Joe Brusuelas also stated that the current US job market has already shown an overall cooling trend, initially reflecting the impact of tariffs.

US business owners may be waiting and seeing.

In fact, "resilience" was once a key word for the US economy during the COVID-19 pandemic. This characteristic also applies in the current phase of trade conflicts.

Similar to the COVID-19 period, the current US economy shows a trend of maintaining low layoff rates and stable business activity. However, with the implementation of tariffs, economic data for May has already begun to show signs of a slowdown in US hiring and manufacturing output data.

Although Wall Street analysts expect the US labour market not to collapse,the labour market may also increasingly exhibit a state of "hesitation" and "stagnation"—because business employers are increasingly realizing that the best strategy in this period of uncertainty is to wait and see—that is,neither to lay off employees on a large scale nor to increase hiring.

This trend has also been clearly reflected in the non-farm payrolls data: although the unemployment rate has not surged significantly, the growth in non-farm payrolls has declined month by month.

This is actually not good news for the US economy—although the labour market will not collapse, the prolonged hiring freeze by companies will also have a negative impact on the economy.

"We are approaching an inflection point, and concerns about stagflation may penetrate into a broader market level," said Chris Zaccarelli, Chief Investment Officer of Northlight Asset Management. "We are seeing a decline in productivity, a slowdown in economic growth, and at the same time, signs of rising (or sticky) inflation."