United States: The Labour Market Continues to Recover

The US labour market continues to build on its recent momentum. After a choppy performance throughout most of 2025 and into early 2026, net job creation is now posting consecutive monthly gains. In fact, this marks the first time in a year that three straight months have remained in positive territory. Recent revisions have also been largely upward, amounting to +29,000 for March and +64,000 for April. Outside of annual benchmark revisions, monthly revisions of this magnitude have not been observed since September 2024.

What explains this shift in momentum and the recent solid results? In May, 54.4% of the 250 industries tracked recorded an increase in employment. This is slightly stronger than the 54.0% observed over the previous two months and, more importantly, compares favourably with the 48.6% average seen between January 2025 and February 2026. Modest gains were recorded in construction and manufacturing (despite the loss of 10,000 jobs in the automotive sector). Although still clearly positive, job creation in private services slowed compared with March and April. Declines were even observed in wholesale and retail trade, information services, and finance. Employment growth in professional services was its weakest since February. These weaknesses were offset by solid gains in private health services, the strongest hiring in food services since January 2023, and the most robust increase in government employment (mainly at the local level) since July 2024.

While the labour market was, not so long ago, a source of concern, this is much less the case today. Certain sectors nonetheless continue to face significant challenges. Job losses in information and financial services, along with softness in professional services, likely reflect adjustments associated with the broader adoption of artificial intelligence. The relatively difficult environment for households is evident in confidence indicators, but also in weak hiring among retailers and in residential construction. Overall, however, the labour market appears to be regaining strength after several months of softness, despite a geopolitical backdrop marked by considerable uncertainty. Once again, this underscores the remarkable resilience of the US economy.

The US economy appears to be improving in the second quarter of 2026, despite the challenges stemming from the conflict in Iran, notably rising energy prices. The firmer performance of the labour market will allow Federal Reserve (Fed) officials to focus more closely on the risks associated with higher inflation. This could complicate the task of the Fed’s new Chair, Kevin Warsh, who will eventually face pressure from President Trump to quickly lower policy rates, even as the economic backdrop increasingly suggests the opposite may be warranted. For now, we expect monetary policy to remain on hold.