Tariffs Haven’t Hit the Job Market or Driven Unemployment Up Yet

It is officially “jobs week,” the beginning of the month when many datasets related to Americans' employment situation are released. The unemployment rate, which will be released on Friday, grabs the most attention.

What does the Morning Consult data say about joblessness in the U.S.?

The unemployment index by Morning Consult uses a simplified version of the Bureau of Labor Statistics (BLS) unemployment questions, and consumers are surveyed every day. The index, shown in the U.S. Jobs and Labor Tracker, presented upward momentum in the second half of May. However, this does not indicate that the unemployment rate will increase. We expect that the unemployment rate will likely remain at 4.2%.

April's job openings and labor turnover survey (JOLTS) data was released on Tuesday. Market watchers follow the hiring, layoffs and job posting figures to understand the slack or the tightness in different industries and the overall labor market. Perhaps this release has garnered more attention because lately, everyone has been looking for clues as to whether they can see the effects of the Trump administration's tariff policies in "hard" economic data. This data set ultimately serves as one of the many leading indicators for the unemployment rate. The latest figures for April did not show a jump in layoffs. While this is good news, we expect that since April was the “official start” of the more comprehensive tariff decisions, the real effects would show up later in this data set, perhaps in late summer.

Why is there an expectation of higher joblessness?

Many surveys, especially those geared toward surveying businesses, have added recent questions to their standard questionnaires to gauge how firms are grappling with the new tariff policies. There is abundant focus on input costs, cost pass-through, and questions about employment changes. The examples are plentiful: 

• The Dallas Fed asked about the effects of tariffs on “following aspects of firms’ businesses”, employment being one option. 23.6% of respondents noted a slight decrease, and 7% responded with a significant decrease in employment. Interestingly, similar questions were posed in 2018 and 2019 during President Trump’s first term; the total share for “decrease” was less than 10%, and most businesses saw no impact on employment. There is a notable increase among firms that perceive adverse outcomes of tariffs on employment now. 
• In the Cleveland Fed survey, the expectations of negative employment outcomes are similar to those of the Dallas Fed, with 22% of respondents expecting “decreasing” employment.
• The most recent CFO survey by the Richmond Fed, the Atlanta Fed, and Duke University shows expected negative changes in 2025 employment for companies that source supplies from tariff countries. Those that source materials from China, Canada and Mexico intend to contract headcount, while those that don’t intend to increase headcount.
• The most recent Atlanta Fed survey on business uncertainty shows that 40% of firms could scale back hiring in response to uncertainty about tariffs, taxes, government spending, monetary policy and regulation.
• Finally, the New York Fed survey results released yesterday show that a higher share of businesses that use imported goods decreased headcount somewhat and strongly. 

In addition to these surveys, ADP released its most recent figures, showing that private sector hiring is slowing again. The figures came in lower than expected, stoking fears about employment. In March and April, Google searches for the term “recession” increased significantly as both consumers and businesses adjusted their recession probabilities higher. Perhaps the pandemic recession felt like it materialized overnight, the expectation is similar now with trade policies and government spending. While these uncertainty-driven recession expectations make sense, they remain elusive in “hard” data as we enter the summer months. The expectation for this hard data to show up should be more likely in late summer and into the fall. The business surveys above paint a pessimistic picture for the next six months, but we would need to see subsequent months of data to confirm that these expectations will turn into higher unemployment. 

What are consumers reporting?

In Morning Consult’s recently launched tariff tracker, we survey consumers. A sizeable share of consumers are also employees, who observe decisions taken or perhaps make decisions regarding their business. Therefore, we asked survey respondents whether they had seen their business making investment, hiring or layoff decisions due to tariffs or tariff uncertainty.

Consumers' perceptions of employment changes broadly align with the business surveys above. Those who noted a change in employment, whether in hiring or layoffs, remain at less than 30%. There are some differences among demographics, but this could reflect how attuned or involved they are in these decisions. At this point, through the consumer lens, we are not seeing a broad increase in joblessness due to tariffs. This reinforces the “frozen” labor market at this point. Many businesses remain in a wait-and-see mode regarding employment in the face of tariffs. This was also confirmed by the Fed Board’s latest Beige Book analysis on labor markets. 

What business surveys predict and what workers observe reveals a labor market that holds onto its “frozen” trend driven by uncertainty. But this calm may be temporary. As tariff effects materialize in “hard” data late in the summer, the disconnect between expectations and real time experiences will likely narrow.