Labor market shifts into a higher gear as it pulls more people into work

The labor market has shifted into a higher gear, powering through an energy shock and immigration restrictions to pull more people into work even as consumers sour on an economy that is straining their wallets.

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The vigorous pace of hiring over the past few months is a reversal from the stagnation of 2025, a year of unpredictability and dislocation that led businesses to put hiring plans on ice. And yet, Americans remain in a foul state of mind as wages fail to keep pace with surging prices for gasoline and food.

Employers added 172,000 jobs in May, the latest data showed Friday, blowing past expectations, while the unemployment rate remained at 4.3% for the third month in a row. With upward revisions to the previous two months, the economy has packed on 114,000 jobs per month on average this year, up from only 10,000 in 2025.

The consecutive months of strong growth, with no signs of increasing layoffs, are evidence that businesses have shaken off a period of paralysis last year — a hangover from a hiring binge after the COVID-19 pandemic and wild swings in policy from the Trump administration.

“People look ahead, they see all the growth that’s going to come years from now, and it’s making them feel wealthier, so they spend. It’s making them feel more optimistic, so they invest,” said James Egelhof, chief U.S. economist for financial services company BNP Paribas. “We think that’s translating into a pickup in labor demand.”

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Tax breaks enacted in 2026 as well as the artificial intelligence investment boom have fueled a sense that it might finally be time to splurge, Egelhof said.

Earlier this year, forecasts had been much more dour, mostly because the White House’s campaign against legal and illegal immigration had depressed labor force growth to near zero.

But the Supreme Court’s decision to rein in President Donald Trump’s power to wield tariffs, which has resulted in billions of dollars in tariff refunds, restored some confidence to the private sector. Departures from the federal government have largely ceased, after 325,000 jobs disappeared in the first year of Trump’s second term. Even with immigration at a low ebb, labor force participation for workers between 25 and 54 has remained high, ticking up to 83.9%.

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This article originally appeared in The New York Times.