As the US May employment report is set to be released on Friday (June 6th), global investors and economists are once again focusing on the latest developments in the US labor market. This report will not only reveal the current health of the US economy but may also provide important clues for future monetary policy and economic trends. Against the backdrop of increasing uncertainty in the global trade environment, the US labor market is showing initial signs of slowing, which further highlights the importance of this report.

Initial Signs of a Slowing Labor Market

The US labor market has recently shown nascent signs of weakness, with the latest data providing corroboration for this trend. According to the US Department of Labor, last week's initial jobless claims climbed to 247,000, reaching a seven-month high. This rise indicates that some workers are losing their jobs, and businesses' cautious attitude towards new hires is also intensifying. Furthermore, unofficial private sector statistics further show that companies' willingness to hire is gradually declining, which is closely related to the uncertainty brought by rapidly changing tariff policies. New tariff policies are making businesses concerned about future profitability and market conditions, thereby slowing down their expansion pace.

Rising Layoffs and Corporate Caution

In addition to the increase in initial jobless claims, Challenger, Gray & Christmas's monthly survey report provides further evidence of labor market weakness. The report shows that US layoffs in May 2025 reached 94,000, a significant increase from 64,000 in the same period last year, marking a nearly 47% year-over-year surge. Even more concerning, year-to-date, US corporate layoffs have surged by 80% compared to the same period last year. This trend reflects companies' tendency to cut labor costs to address potential economic risks when facing policy uncertainty. However, as Don Rissmiller, an economist at research firm Strategas, pointed out, despite rising layoffs, companies have not yet resorted to large-scale layoffs, mostly pausing hiring plans, which makes it significantly more difficult for workers to find new job opportunities.

ADP Report and Discrepancies with Official Data

ADP's monthly employment survey provides another perspective for the market. Data shows that in May, the US private sector added only 37,000 new jobs, marking the lowest increase in this report in over two years. Although many economists believe that the ADP report has some deviation in its predictive ability compared to official labor market data, this sluggish figure undoubtedly reinforces market concerns about labor market weakness. Rissmiller stated that current data shows "small cracks, not large cracks" in the labor market, suggesting that the economy has not yet fallen into a severe recession, but growth momentum is weakening.

May Employment Report Expectations and Divergences

According to a Wall Street Journal survey of analysts, the market generally expects the upcoming May employment report from the US Department of Labor to show 125,000 new jobs added, lower than the average increase of 155,000 in the previous three months. Meanwhile, analysts expect the unemployment rate to remain at 4.2%, partly due to the reduced net immigration during the Trump administration, which limited the supply size of the labor market. However, Jonathan Millar, a US economist at Barclays, holds a different view, predicting 150,000 new jobs in May, citing a significant increase in US imports earlier this year and the fact that corporate inventory accumulation has not yet been fully impacted by the new tariff policies. Millar pointed out that these inventories will gradually be consumed in the future, potentially putting pressure on subsequent economic activity and the job market.

The Delicate Balance Between Fed Policy and Economic Equilibrium

Over the past year, the US labor market has experienced a process from weakening in the first half to gradually stabilizing, with the unemployment rate fluctuating between 4% and 4.2%. For the Fed, the current employment situation appears to be in equilibrium, which is an important basis for its decision to pause rate cuts this year after cumulatively cutting rates by one percentage point in the last few months of 2024. However, this equilibrium is not solid. Millar of Barclays stated that despite corporate difficulties, most still tend to avoid layoffs, which provides some resilience to the labor market. But he also warned that as inventories are gradually depleted and the impact of tariff policies gradually emerges, the labor market may face greater pressure in the future.

Analysis of Impact on the Dollar and Gold Prices

Overall, the upcoming May employment report will be an important bellwether for the market to judge the direction of the US economy. If the report shows significantly fewer new jobs than expected, it may further exacerbate market concerns about a US economic slowdown, thereby putting downward pressure on the dollar. Weak employment data may trigger a reassessment of the Fed's future monetary policy by the market, and could even rekindle rate cut expectations, which would weaken the dollar's attractiveness.

For gold prices, a weak labor market typically benefits gold's performance as a safe-haven asset. If the employment report performs poorly, coupled with global economic uncertainty and the impact of tariff policies, investors may increase their allocation to gold, pushing gold prices up. However, if the report shows stronger-than-expected labor market resilience, the dollar may gain support, and gold prices may face short-term pullback pressure. In general, the May employment report is not only a "major test" for the US labor market but also a critical turning point for global financial markets. Investors need to closely monitor the report's results and the market reactions it triggers to grasp the future trends of the dollar and gold prices.