Fresh Jobs Data May Help Fed Gauge How Much AI Strains US Labor Market

If you’re spending this Monday morning thinking about Friday, you’re not alone. Wall Street is, too, if perhaps for different reasons. 

The Bureau of Labor Statistics will report May’s employment figures at the end of the week, offering investors and economists insight into a labor market grappling with uncertainty over artificial intelligence, tariffs, the war with Iran and more. Still, the job market has been showing signs of momentum: April and March surpassed analysts’ expectations, and the ADP weekly data continues to look better than at the end of 2025. 

“Healthcare continues to be a robust source of demand for labor, though construction, retail trade and professional services have also been hiring in recent months,” says Ross Mayfield, an investment strategist at Baird. “Outside of the information sector, the job market looks solid enough, even with consumer sentiment near record lows.” 

AI Anxiety 

AI adds another wrinkle to jobs reports nowadays. While we’ve long been fed fictional nightmares about being replaced by robots at work, reality is starting to look somewhat scary, too. Last month, for instance, New York City Comptroller Mark Levine published a report warning that the city must act now to prepare for potential AI-driven job losses. Some companies are hesitant to cop to AI-related layoffs, while others are letting tech take the blame when it’s not deserved, making it hard to understand the actual impact on the labor market. 

“We believe AI is acting as a headwind to new hiring rather than a driver of mass layoffs,” says Thomas Urano, co-chief investment officer at Sage Advisory. “If that dynamic is structural, it means payroll prints can stay soft even without a traditional recession signal.” 

Of course, this all complicates how the Federal Reserve, responsible for maintaining economic stability and maximizing employment, reads the labor market. If AI is structurally thinning the hiring pipeline, the Fed may need to rethink what a healthy payroll number looks like, Urano adds. Speaking of the Fed, it doesn’t have a job we’d want: 

• The central bank will be closely watching this week’s jobs report as it considers how to bring down still-high inflation. As of Friday, the CME’s FedWatch tool showed a 98.8% chance that the Fed will keep rates steady during its June meeting. A cut doesn’t look possible until at least next year, per the tool.  
• “Another strong nonfarm payrolls report would only serve to confirm what the market has been pricing for weeks now: More rate cuts from here are highly unlikely,” absent a financial crisis or recession, Mayfield says. “The bar for raising rates still seems fairly high, but an extended pause should be the base case for investors.”

What Else to Watch: Investors will also be looking for some insight on business activity via today’s Institute for Supply Management manufacturing data release, and the state of the economy via the Fed Beige Book on Wednesday.