The Economy Is Still Adding Jobs—So Why Does Finding One Feel So Hard?

Companies look to hire new employees at job fair in southern Florida.

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On paper, the May jobs report delivered another encouraging headline: The U.S. economy added 172,000 jobs, marking the third consecutive month of job gains this year. Unemployment remained unchanged at 4.3%, and job growth was more widespread than it had been in the two previous months, when job growth in health care dominated. In May, leisure and hospitality led the growth pack, followed by government and health care, according to the Bureau of Labor Statistics.

But beneath the surface, economists say the labor market is showing a tale of two realities where the economy is creating jobs while workers who have been laid off or who are new to the labor force (such as recent college grads) are finding it harder to land one. Overall, the share of unemployed people who have been out of work for 27 weeks or more rose to 27.5% in May, up from 20.4% a year ago. Meanwhile, the unemployment rate for recent college graduates between ages 22-27 is 5.6%, higher than the overall unemployment rate.

“I think we have to acknowledge that this is a brightening picture,” said Mark Hamrick, Washington bureau chief and senior economic analyst at personal finance platform Bankrate. “But, there is no shortage of challenges for Americans and the U.S. economy.” When you look at the details, he added, “the glowing narrative starts to lose some of its shine.”

Moreover, Hamrick points out that job growth isn’t even across the board, with some industries more vulnerable to having work replaced by artificial intelligence showing job loss.

Where jobs are growing, according to the May 2026 jobs report.

Forbes

A Labor Market Contradiction

According to BLS’s recent Job Openings and Labor Turnover (JOLTS) survey, job openings increased by 731,000 in April, the latest month for which data is available. Meanwhile, the rate of hires decreased by 419,000. Laura Ullrich, director of economic research at job searching platform Indeed, explained that this contradictory scenario is due to a decrease of people who are leaving their jobs today as well as an overall layoff rate that has been relatively unchanged from month-to-month despite headlines.

“This is not what some people think because you often hear about sectors that have had quite a bit of layoffs like media and tech,” Ullrich said, while acknowledging that layoff rates are largely uneven across industries. “But if you look at it from a macro picture for the whole economy, layoffs are very low.” According to Challenger, Gray and Christmas’ latest job cuts report, technology is the industry with the most job cuts this year, with 123,653 announced cuts, up 66% from this same time last year. As suspected, artificial intelligence is the top reason why many companies said they’ve made cuts in this sector.

Ullrich emphasized that low layoff rates combined with a decreased number of people leaving their jobs has led to a low hire market, but that doesn’t mean no hires are happening at all. With some industries growing faster than others, she said enough hiring is happening in certain sectors where it’s possible for 172,000 jobs to have been added to the economy.

For workers who are currently employed, Ullrich says this low hire market may not seem so bad. But for unemployed individuals who are seeking work, this low hire market is leading to a high long-term unemployment rate.

“People are kind of hugging onto the jobs that they’ve got,” she said. “And so the probability that anybody’s going to become unemployed today is really low. But if you do become unemployed, it’s a tough time in those sectors that have been losing jobs.”

Ullrich said this creates a grim situation for many unemployed job seekers, even amid back-to-back reports of monthly job gains.

Where Jobs Are Growing Amid AI

While a low hire market is not ideal for anyone looking for employment, the fact that more jobs overall are being added to the economy shows a sign of hope for individuals open to opportunities, even if that means entering a new industry.

According to BLS data, leisure and hospitality led the pack with 70,000 jobs added in May, the most of any industry, followed by government and health care. Ullrich said that while it’s hard to pinpoint what exactly may be leading to a surge in leisure and hospitality jobs, some of it could be linked to a ramp up in hiring for the World Cup taking place this summer.

“It’s always hard to say exactly,” she said in regards to the specific factors leading to job growth in some sectors. “But it’s good news that growth was more broad-based than what we have been seeing.” For some time, health care had been the main driver of job growth due to an aging population and the industry having fewer jobs that can be replaced completely by AI.

When looking at an industry like finance, which is more vulnerable to AI, 22,000 jobs were lost in May, the most of any sector.

While the impact of AI is at the top of many people’s minds, Ullrich said she wants to be cautious about feeding the narrative that all AI-related cuts are due to the technology simply taking over people’s roles.

“There is the fact that AI is doing some jobs,” she said. But as an economist she believes the bigger impact is that more companies are reallocating their funds to invest more in AI, which is leaving less money on the table to make new hires.

“In economics we talk about this trade off between capital and labor,” she said, adding that if you spend more money on capital, like equipment, software, and technology, then you have less in the budget to spend on labor. This doesn’t mean that human labor isn’t needed at all, but Ullrich said this does create a low hire market in sectors where growth is shrinking due to AI’s impact.

“So I think it is about AI, but I don’t think it’s solely about AI actually doing people’s work,” she emphasized.

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