Did the Jobs Market Hit the Pause Button?

Executive Summary

The S&P 500 finished the week up 3.13% at a new high as market participants looked past economic and tariff uncertainty, but this week's data revealed an economy losing momentum across multiple fronts.

The clearest warning sign came from the labor market. While initial unemployment claims fell to 236,000, continuing claims jumped to 1.97 million—the highest level since November 2021, according to the Department of Labor. This combination tells a troubling story: companies aren't firing workers in large numbers, but they've essentially stopped hiring. The job market has hit the pause button, creating challenges for recent graduates struggling to find their first positions.

Consumer spending reflects this underlying weakness. The Bureau of Economic Analysis reported that personal income declined 0.4% in May while disposable income fell 0.6%. Despite earning less, Americans maintained their 4.5% saving rate, suggesting households are bracing for tougher times ahead. This defensive behavior helped drive Q1 GDP to contract 0.5%—the first decline in three years—as consumer spending managed just 0.5% growth, the slowest pace since the pandemic.

The housing market mirrors this broader slowdown. New home sales plummeted 13.7% in May to 623,000 units, creating a 9.8-month supply of inventory—the highest since September 2022, according to the Census Bureau. Even as mortgage rates hover near 7%, home prices continue climbing, with the median new home price reaching $426,600, highlighting the disconnect between demand and pricing.

Consumer confidence reflects these economic strains. The Conference Board reported that confidence dropped 5.4 points to 93.0 in June, with expectations falling below recession-indicative levels. Concerns about tariffs, inflation, and economic pressures remain elevated, even as some inflation worries have begun to ease.

Federal Reserve Chair Jerome Powell acknowledged these crosscurrents during his testimony before Congress, describing the economy as "solid" but cautioning that inflation remains above the 2% target. His emphasis on keeping rates steady at 4.25-4.50% until tariff impacts become clearer suggests the Fed recognizes the delicate balance between supporting growth and controlling prices.

The week's data points to an economy in transition—not collapsing but clearly downshifting as businesses and consumers adjust to persistent uncertainty.

Monday:
Existing-Home Sales rose 0.8% in May to a seasonally adjusted annual rate of 4.03 million units, though still down 0.7% year-over-year. The national median sale price reached a record high of $422,800, marking the 23rd consecutive month of year-over-year increases. Inventory for sale continues to rise, with supply up 6.2% to roughly 4.6 months' worth of homes. Mortgage rates remain elevated—hovering just under 7%—but have eased modestly, offering cautious optimism that lower rates later in the year could boost market activity.
(Source: National Association of Realtors)

Tuesday:
Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee on monetary policy. Chair Powell described the economy as solid with growth near 2.5%, low unemployment around 4.2%, and labor conditions near full employment—while cautioning that inflation remains above the 2% target. He stressed that the Fed would maintain its current 4.25–4.50% policy rate, delaying any rate cuts until after they assess whether tariff-driven price increases over the summer are temporary or more persistent. He emphasized that monetary decisions would remain data-driven and free from political influence, despite external pressure. He acknowledged that some FOMC officials favor easing as soon as July.
(Source: CNBC)

Consumer Confidence declined notably in June, with the Conference Board Index dropping 5.4 points to 93.0, reversing nearly half of May's improvement. Both current conditions and future expectations weakened, with the Expectations Index falling below recession-indicative levels. Concerns remained high around tariffs, inflation, and economic pressures, although mentions of easing inflation slightly increased.
(Source: The Conference Board)

The S&P CoreLogic Case-Shiller Index fell 0.4% month-over-month, with annual growth slowing to 2.7%, marking its weakest pace since mid-2023. Both the 10-city and 20-city composite indexes declined, reflecting a broad-based moderation in home price appreciation. Despite the slowdown, prices still reached new highs in April, indicating that while growth is easing, the housing market remains elevated and increasingly driven by regional conditions.
(Source: Standard and Poor's)

Wednesday:
New home sales declined 13.7% in May 2025 to a seasonally-adjusted annual rate of 623,000 units, marking a 6.3% drop from the previous year, according to the U.S. Census Bureau and Department of Housing and Urban Development. Meanwhile, inventory rose to 507,000 units, creating a 9.8-month supply compared to April's 8.3-month supply. Despite the sales decline, the median price increased to $426,600, up 3.7% from April and 3.0% above May 2024. The data reflects a housing market where demand has weakened significantly while prices continue rising, creating the largest inventory buildup since the post-recession period.
(Source: Census Bureau)

Thursday:
Initial Claims for Unemployment Insurance dropped for the third week in a row, falling by 10,000 to 236,000 and beating what economists expected. But here's the catch: continuing claims jumped by 37,000 to 1.97 million, hitting the highest level since November 2021. What this tells us is that employers aren't firing people in large numbers, but they're also not doing much hiring. It's like the job market hit the pause button. This is especially tough for recent college graduates who are finding it harder to land that first job. Trade policy uncertainty isn't helping either, as companies seem reluctant to make big staffing moves. The bottom line is that if you have a job, you're probably keeping it. But if you're looking for work, it's a tougher climb. This trend suggests we might see the unemployment rate tick up in June as more people struggle to find new positions.
(Source: Department of Labor)

The Bureau of Economic Analysis released its final estimate for Q1 2025 GDP, revealing the U.S. economy contracted by 0.5%, marking its first decline in three years. The culprit was a perfect storm: imports surged as businesses rushed to beat expected tariffs while government spending pulled back sharply. Consumer spending crawled along at just 0.5% growth—the slowest since the pandemic—with broad-based weakness across private industries offsetting slight gains in government sectors.
(Source: Bureau of Economic Analysis)

Pending Home Sales rose more than expected in May, with contracts to buy previously owned homes jumping 1.8%—far exceeding economists' forecasts of just 0.1% growth. The Pending Home Sales Index hit 72.6, marking a solid rebound after April's sharp 6.3% decline when high mortgage rates spooked buyers. All four regions posted monthly gains, though the year-over-year picture was mixed: the Midwest and South showed strength while the Northeast and West dipped slightly. NAR's chief economist Lawrence Yun pointed to steady job growth and rising wages as key supports, but emphasized that fluctuating mortgage rates remain the deciding factor for most homebuyers. The May bounce suggests the housing market is finding its footing just as the peak buying season gets underway.
(Source: National Association of Realtors)

Friday:
The Personal Income and Outlays report from the Bureau of Economic Analysis for May 2025 reveals a broad-based economic slowdown hitting American households hard. Personal income declined 0.4%, driven by reduced government social benefits and lower farm incomes, despite private wage growth. Disposable income fell 0.6% monthly while consumer spending declined 0.1%, as people cut back on goods but continued spending on services. Inflation remained moderate with the core PCE price index rising 0.2% monthly and 2.7% annually, staying near the Federal Reserve's 2% target. Most telling, the personal saving rate held steady at 4.5%—despite earning less, Americans maintained their saving discipline, suggesting they're bracing for uncertainty and potentially setting up weaker consumer spending ahead.

The University of Michigan's Survey of Consumers showed a notable rebound in June 2025 after six months of declining sentiment. The main index jumped 16.3% to 60.7, though it remains 11% below last year's level. Current conditions improved 10% to 64.8 as people felt better about their present financial situation. Future expectations saw the biggest gain, surging 21.3% to 58.1, despite staying below year-ago levels. Inflation concerns eased significantly, with year-ahead expectations dropping from 6.6% to 5.0% and long-term views falling from 4.2% to 4.0%. While sentiment improved across multiple areas, worries about tariffs and economic uncertainty persist, though they've moderated.
(Source: University of Michigan)

By The Numbers

Employment Indicators

Employment data helps gauge whether consumers have jobs and money to spend. Consumer spending accounts for more than 70% of GDP.

Note: Values above 250K for the 4-Week Average, combined with rising unemployment, would signal a weakening economy. Next unemployment report: July 3, 2025. Source: Department of Labor

Economic Growth (Real GDP)

GDP growth provides a broad measure of overall economic activity and signals whether the economy is expanding or contracting.
Source: Bureau of Economic Analysis; Estimate from Federal Reserve Bank of Atlanta

Inflation Measures (CPI Year-over-Year)

Source: Bureau of Labor Statistics; May estimate from Federal Reserve Bank of Cleveland

Note: While inflation has moderated, new tariffs may cause temporary spikes in monthly data. Once tariffs have been in place for a full year, inflation should revert closer to the underlying trend.

Interest Rate Outlook

Current Fed Funds Rate: 4.25-4.50%

Note: Changes in monetary policy expectations reflect market participants' views on how the Fed will likely respond to shifts in inflation or employment.
Source: CME FedWatch Tool

Corporate Earnings Outlook (S&P 500 Estimates for 2025)

Source: S&P Dow Jones Indices

Market Valuation

Disclosure:

This material is provided by Todd Van Der Meid, MBA, CFP®, through Rhino Wealth Management, Inc., a Registered Investment Adviser, solely for informational purposes. It is not intended as investment, tax, legal, or accounting advice. Investors should consult qualified professionals before making financial decisions.

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