The national unemployment rate held at 4.2% in May 2025, though this represents a 0.2 percentage point increase from the same month last year, the U.S. Bureau of Labor Statistics reported Tuesday. The data reveals a labor market showing signs of cooling as job creation momentum slows nationwide.
Unemployment rates rose in three states during May, fell in two states, and remained stable in 45 states and the District of Columbia. More concerning for employers, 24 states and the District saw jobless rates increase compared to May 2024, while only four states recorded decreases.
State unemployment patterns reveal geographic disparities
South Dakota maintained the nation’s lowest unemployment rate at 1.8%, while the District of Columbia posted the highest at 5.9%. Nevada followed with 5.5% unemployment and Michigan with 5.4%.
Massachusetts experienced the largest monthly increase, with unemployment rising 0.2 percentage points to 4.8%. Iowa and Virginia each saw smaller increases of 0.1 percentage point. Indiana and New York were the only states to record decreases, each dropping 0.2 percentage points.
The year-over-year comparison shows broader labor market deterioration. Mississippi recorded the largest annual increase at 1.2 percentage points, while Massachusetts saw unemployment jump 0.8 percentage points from May 2024. Indiana showed the strongest improvement, with unemployment falling 0.4 percentage points year-over-year.
Job growth stalls nationwide in May
Employment creation effectively stopped in May, with nonfarm payroll employment showing no meaningful change in any of the 50 states or the District of Columbia. This represents a sharp contrast to typical monthly job growth patterns and suggests employers may be pulling back on hiring.
However, annual employment data shows more positive trends in certain regions. Texas led job creation over the past year with 213,300 new positions, followed by Florida with 148,700 and New York with 100,400.
Regional job growth concentrated in specific states
When measured by percentage growth, South Carolina topped the list with a 2.7% increase in employment over the year. Idaho followed at 2.6% growth and Utah at 2.4%. These gains suggest continued economic expansion in certain markets despite the broader national slowdown.
The employment data comes from establishment surveys measuring payroll jobs, while unemployment figures derive from household surveys tracking where people live. Both datasets point to a labor market that has lost momentum compared to earlier periods of stronger growth.
Implications for employers and HR leaders
The mixed signals in state-level data suggest employers should prepare for varying labor market conditions depending on their geographic footprint. States showing unemployment increases may offer more candidate availability, while regions with job growth may face continued talent competition.
The stagnant monthly job creation across all states indicates employers collectively scaled back hiring in May, potentially reflecting economic uncertainty or shifting business priorities. HR departments should monitor whether this represents a temporary pause or signals broader hiring caution ahead.
Twenty-one states maintained unemployment rates below the national average of 4.2%, providing employers in those markets with relatively tight labor conditions. The four states and District of Columbia above the national rate may offer more favorable hiring environments.
The Bureau of Labor Statistics noted minor corrections to April 2025 household survey estimates related to a redesigned sample methodology, though officials said the impact was negligible on overall trends.
