Flash Report: May Unemployment Flows Suggest Some Labor Market Weakening
KEY TAKEAWAYS
- The headline U.S. unemployment rate in May was 4.2%, the same as April’s reading. More precise data show the rate moved slightly from 4.187% in April to 4.244% in May.
- Employment conditions in the U.S. remained historically robust last month, but modest signs of deterioration began to emerge.
- The change in the unemployment rate was driven by more people losing or leaving their jobs and becoming unemployed (job separations), fewer unemployed people finding jobs, and a decline in the number of people who previously were not in the labor force but are now seeking work.
This analysis focuses on how potential flows into and out of unemployment during May affected the overall unemployment rate.
Breaking the change in the unemployment rate into key components can offer a better sense of labor market conditions. (For information on this method, see Maximiliano Dvorkin and Serdar Ozkan’s St. Louis Fed On the Economy blog post “The Recent Ins and Outs of Unemployment: Using Flows to Study Labor Market Dynamics.”)
Data Highlights
While the headline unemployment rate remained at 4.2% in March, the unrounded rate ticked up a modest 0.06 percentage points. The May jobless rate stayed within the narrow range—4.0% and 4.2%, levels consistent with full employment—observed for the last 12 months, making the U.S. labor market remarkably stable since May 2024. (For more, see the Bureau of Labor Statistics’ Employment Situation release data in FRED.)
The most notable developments in May’s data were the declines of 0.30 percentage points in the employment-to-population ratio and of 0.20 basis points in the labor force participation rate (the share of people who are either employed or actively looking for work). These declines show a very modest downward trend over the past year and could be related to demographic changes (aging) in the U.S. population and the gradual cooling of the labor market.
Relative to their averages over the last three months, the contribution of job separations to the unemployment rate increased in May and the contribution of unemployed people finding jobs fell. (See the table below.) The number of people finding jobs was more than offset by the number of people losing or leaving jobs, resulting in upward pressure on the unemployment rate. Importantly, the flow of people who were not looking for work but began a job search and had yet to find employment declined in May relative to previous months. Absent this decline, the increase in the jobless rate would have been slightly larger. This decline is also consistent with the drop in the labor force participation rate.
| May 2025 | Last 3 Months | Last 12 Months | ||
|---|---|---|---|---|
| Average Monthly Change in Unemployment Rate (Percentage Points) | +0.06 | +0.03 | +0.02 | |
| Contribution of Job Flow Components to Average Monthly Change in Unemployment Rate (Percentage Points) | People Losing or Leaving Their Jobs and Becoming Unemployed | +1.05 | +0.97 | +0.95 |
| Unemployed People Finding Jobs | -1.04 | -1.07 | -1.06 | |
| People Previously Not in the Labor Force Who Are Now Seeking Work | +1.01 | +1.10 | +1.06 | |
| Unemployed Workers Leaving the Labor Force (e.g., Discouraged Workers) | -0.99 | -0.98 | -0.94 | |
| SOURCES: Bureau of Labor Statistics and Research staff’s calculations. | ||||
| NOTES: Data are seasonally adjusted. The overall change is based on the precise unemployment rate for these periods; for example, the unemployment rates were 4.2443% in May and 4.1873% in April. The flow components into and out of unemployment add up to the change in unemployment with a negligible residual. Again, see see Maximiliano Dvorkin and Serdar Ozkan’s St. Louis Fed On the Economy blog post “The Recent Ins and Outs of Unemployment: Using Flows to Study Labor Market Dynamics” for more information about this method. | ||||
Citation
ldquoFlash Report: May Unemployment Flows Suggest Some Labor Market Weakening,rdquo St. Louis Fed On the Economy, June 6, 2025.
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