This is a great report.
- Prior was +115K (revised to +179K)
- Two-month net revision +93K
- March was +185K (revised to +214K)
- Unemployment rate 4.3% vs 4.3% expected
- Prior unemployment rate 4.3%
- Unrounded unemployment 4.296% vs 4.337% prior
- Participation rate 61.8% vs 61.8% prior
- U6 underemployment rate 8.1% vs 8.2% prior
- Average hourly earnings +0.3% m/m vs +0.3% expected
- Average hourly earnings +3.4% y/y vs +3.4% expected
- Average weekly hours 34.3vs 34.3 expected
- Change in private payrolls +120K vs +85K expected
- Change in manufacturing payrolls +7K vs +2K expected
- Government payrolls +52K vs -8K in April
The May jobs report blew past a low bar. Nonfarm payrolls rose 172K, topping every forecast in a consensus range that maxed out near 125K, and the back months were marked up hard — March to +214K and April to +179K, a net +93K revision that flips the recent run of downward revisions on its head.
The details back the headline. The unemployment rate held at 4.3% but eased on an unrounded basis to 4.296% from 4.337%. Wages firmed, with average hourly earnings up 0.3% on the month and the workweek steady at 34.3 hours. Leisure and hospitality led with +70K, local government added 55K and health care 35K. The soft spots were narrow: financial activities shed 22K and manufacturing barely budged at +7K.
This is not a labor market crying out for help, and the rates market noticed. Odds of a December hike have jumped to 61% from 45% — a continuation of the repricing for a Fed that markets were flirting with cutting in July before the Iran war. With inflation stuck at 3.8% and hiring re-accelerating, the “low-hire, low-fire” standoff suddenly looks like it’s tilting toward hire, and that’s the version of the economy that suggests the Fed could be falling behind the curve.
In response, USD/JPY is but about a dozen pips and back through 160.00. EUR/USD has quickly fallen to 1.1605 from 1.1640. S&P 500 futures have turned more deeply negative and are down 0.6%. In the rates market, it’s a stronger move with yields up 7-4 bps and led by the front end.
This article was written by Adam Button at investinglive.com.
