Spring Labor Market Defies AI Job‑Loss Forecasts, Hiring Surges in May

Spring labor market defies AI job‑loss forecasts

Private payroll data released Wednesday showed ↑ 122,000 jobs added in May, outpacing the forecast of 110,000 and marking the strongest hiring month since January 2023. The surge arrives as the spring labor market appears to rebound despite lingering inflation pressures.

Broad‑based gains across most sectors

ADP chief economist Nela Richardson noted that eight of ten surveyed industries posted gains, a breadth not seen in recent years. Meanwhile, the Bureau of Labor Statistics reported Reuters that job openings climbed to 7.6 million in April, a rise of more than ↑ 730,000 from the revised March figure.

“If there was downside momentum for much of 2025, it seems to have stabilized, and there’s some prospect for a pickup in job growth this year,” said Skanda Amarnath, executive director of Employ America.

Amarnath cautions against attributing the rebound to artificial intelligence. He argues the hiring bounce stems from two unrelated forces: firms correcting a pandemic‑era over‑hire and the easing of immigration headwinds that intensified after the pandemic era.

Immigration and post‑pandemic hiring correction

Companies that expanded staff during the pandemic now face a talent gap; the need to restore productivity is prompting fresh recruitment. At the same time, the fallout from the Trump administration’s deportation policies is waning, removing a drag on labor supply.

AI‑related sector performance

The only industry showing a clear AI‑linked contraction was the information segment—classified by ADP as software publishing, data processing, and telecommunications—which shed ↓ 9,000 jobs in May and recorded the slowest wage growth at 4.0 %.

However, Amarnath dismisses the notion that tech‑heavy fields are shedding jobs; on the contrary, openings in those areas have risen after a prolonged decline.

Hiring patterns and wage dynamics

Despite the surge in openings, hires actually fell to 5.1 million in April, and quits remained flat, echoing last year’s low‑turnover environment. Larger employers posted vacancies more than 80 % above pre‑pandemic levels, while smaller firms—accounting for the bulk of hires—added 67,000 positions, according to ADP data.

Wage growth for stayers held steady at 4.4 %, while the premium for switchers narrowed to 6.5 % from 6.6 %, suggesting workers favor stability over risk.

Implications for Federal Reserve policy

The labor market’s stabilization collides with the Federal Reserve’s tightening trajectory. Markets anticipate a rate hold at 3.5 %–3.75 % when the Fed meets on June 16‑17, yet inflation remains stubborn. Bloomberg notes that officials may shift from an easing bias to a tightening stance by July if price pressures persist, potentially setting the stage for a rate hike later in the year.

Intel provided by Victor Hale (Equities & Market Dynamics Analyst).