The U.S. economy added 172,000 jobs in May. Far more than the roughly 85,000 economists expected. Unemployment held steady at 4.3 percent. This marks the third straight month of solid gains above 100,000.
Yet beneath the headline strength lies a tale of two labor markets. One where service sectors keep hiring. Another where technology firms announce record cuts. AI Influence Grows in Layoff Announcements
Employers announced 97,006 job cuts last month. A 16 percent jump from April. The highest May total since 2020. Technology led with 38,242 positions eliminated. The most in nearly two years. AI ranked as the top cited reason for the third consecutive month. Accounting for about 40 percent of announced reductions. So far this year firms have blamed AI for more than 87,000 cuts. Already topping all of 2025.
The numbers come from Challenger, Gray & Christmas data reported across outlets including Bloomberg and Yahoo Finance. They paint a picture of companies streamlining operations even as overall hiring continues. But the disconnect raises questions. How long can broad payroll growth hold if key innovative sectors pull back?
Leisure and hospitality added jobs at a healthy clip. Health care and local government contributed too. Financial activities shed 22,000 positions. The sector is down 107,000 from its peak a year ago. Private payroll processor ADP reported 122,000 jobs added. Beating its own forecasts. The data aligns with the government figures. Suggesting the labor market has cooled from pandemic-era highs but remains resilient.
Wage growth came in moderate. Average hourly earnings rose 0.3 percent in May. Enough to keep pace with inflation in recent readings but offering little extra for workers. Revisions to prior months boosted the picture. March and April added a combined 93,000 more jobs than first reported. The three-month average now sits comfortably above 150,000.
Analysts reacted with a mix of relief and caution. The beat reduced fears of an imminent slowdown. It also lifted Treasury yields. The 10-year note moved above 4.5 percent as traders dialed back expectations for near-term Federal Reserve rate cuts. Markets dipped on the news. Growth stocks felt the pressure most.
Meanwhile the AI story gathers force. A Boston Consulting Group report from April projected that 50 to 55 percent of U.S. jobs could be reshaped by artificial intelligence over the next two to three years. Only 10 to 15 percent face full elimination in that timeframe. The rest see augmentation. New roles created as demand expands from productivity gains. Substitution happens more slowly.
Companies appear to be acting on that forecast. Tech giants and smaller firms alike cite AI as they trim headcount in traditional roles. They often post openings for AI-related skills at the same time. Data analysts with years of experience find themselves replaced by tools that handle routine tasks faster. Prompt engineers and machine learning specialists step in.
This pattern shows up in Challenger data. AI has been the leading cause of announced cuts since March. The 38,000-plus tech reductions in May mark the highest monthly figure since the firm began detailed tracking. Year-to-date tech cuts total 123,653. Up more than 65 percent from the same period last year.
Healthcare has largely escaped the wave. The sector added tens of thousands of positions again in May. Transportation and warehousing showed strength too. These areas offer some buffer. They also highlight where demand remains human-centric. At least for now.
Economists watch the hiring rate closely. It has fallen. Especially for unemployed workers seeking new roles. Layoffs stay low overall. The combination points to a market where employers hold existing staff but hesitate to expand aggressively. Except in pockets tied to AI investment.
The Fortune analysis of the report noted similar tensions. Fortune highlighted how layoffs and hiring coexist. Firms cut in some areas while adding in others. Analyst reactions split between those seeing a soft landing and others warning of structural change ahead.
Recent commentary on X echoed the divide. Economists pointed to ADP’s 122,000 private-sector gain as confirmation of breadth. Others noted the yield spike and its implications for borrowing costs. No one disputes the headline beat. The debate centers on durability.
What emerges is a labor market in transition. Payrolls expand. Unemployment stays low. Yet announced cuts climb. And AI appears as both job creator and eliminator. Companies invest heavily in the technology. They reduce staff to fund that shift. The result? Fewer traditional positions. More demand for specialized skills.
Over time productivity gains could lift overall employment. As BCG argues. Higher output spurs demand for goods and services. That creates roles AI cannot fill. The next two years will test how quickly this plays out. For now May’s report offers reassurance on quantity. It leaves open big questions on quality and composition of work.
Policy makers take note. The Federal Reserve sees no immediate need to ease. Inflation concerns linger. Stronger job growth reinforces patience. Workers face a tougher search in certain fields. Especially mid-career professionals whose skills overlap with what large language models now perform.
The data won’t settle the debate. One month never does. But it adds evidence that the economy absorbs technological change without widespread disruption. At least not yet. Cuts concentrate. Gains spread across services. The middle holds. For how long remains the open bet.
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