In this morning’s data, the economy added 272,000 jobs in May, much higher than expected. The Health Care and Social Assistance and Construction industries were relatively strong, while the Temporary Help industry was relatively weak. The Unemployment Rate ticked one-tenth higher to 4.0%, and the Labor Force Participation Rate was two-tenths lower at 62.5%. Average Hourly Earnings increased 0.4% in May, higher than expected, and grew 4.1% on an annual basis. In addition, Average Weekly Hours were 34.3, which is the same as the previous month.
Overall, a strong headline jobs number, coupled with an unemployment rate that ticks up to 4%. The labor market shows signs of strength, despite a bit of cooling in the previous month. Meanwhile, average hourly earnings were also higher than expected in May, suggesting elevated wages may continue supporting sticky inflation levels above the Federal Reserve’s target. As a result, the Fed likely remains on hold with interest rate policy until additional moderation shows up in the labor market and inflation measures. The timing of this process will be key for the markets in the coming months as we head into the election this fall.
Following the release of the jobs report, the yield on the U.S. 10-year treasury moves higher, and equity futures are lower as we head into the market open.
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