May jobs report signals Fed not joining rate-cutting party soon
May jobs day in the US is a tale of two labor market reports.
The establishment survey — which asks businesses about employment levels — was quite solid, showing job growth of 272,000 that exceeded economists’ estimates by nearly 100,000.
On the other hand, the household survey — which asks Americans about their job status — was on the soft side, as the unemployment rate ticked up to 4% and the labor force participation rate fell two tenths of a percentage point to 62.5%.
Markets appear to be focusing more on the solid establishment survey than the sluggish household numbers. Treasury yields spiked more than 10 basis points in the aftermath of this release, and a 25 basis point interest rate cut by the Federal Reserve is not fully priced in until December.
Of course, bonds had been putting in a very solid performance lately — through Wednesday, the five-day gain for the iShares 20+ Year Treasury Bond ETF was its best of 2024. So this report is serving as pushback to other data released recently, like job openings, that were pointing to a definitive cooling in labor market conditions. It’s a reminder that the Federal Reserve won’t be joining the G7 rate-cutting party started by the Bank of Canada and European Central Bank this week any time soon.
The US dollar rose, gold tanked, and S&P 500 futures fell more than 0.5% in the minutes following the release.
