Research Reports & Trade Ideas

Summary

The U.S. economy generated 339,000 new jobs in May, topping consensus expectations of 190,000 and our forecast of 175,000. The unemployment rate rose to 3.7% from 3.4% in April, which had been a 54-year low. In recent weeks, Fed Chair Jerome Powell and other central bank officials have suggested that they may hold rates steady at the June 13-14 meeting to assess the lagging effects of 10 rate hikes since March 2022. Average hourly earnings increased $0.11 from the prior month and are now 4.3% higher year-over-year, a slight cooling from 4.4% in April. The labor-participation rate was unchanged at 62.6%. In May, job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance. Employment was little changed in mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; information; financial activities; and other services. Job gains in March and April were revised higher by 93,000 jobs. The number of job openings in April increased by 358,000 according a separate report. Demand for workers is still strong with 10.1 million openings, but the number of unemployed rose by 440,000 to 6.1 million. After the jobs report, stocks futures were slightly lower, and the yield on the 10-year Treasury rose slightly. Before this morning’s release, futures contracts suggested an 80% probability that the Fed would hold the target range at 5.0%-5.25% at its June meeting and a 46% chance that the pause would continue on July 26. After this morning’s release, the probability of the Fed standing pat in June dropped to 66%. Continuing strength in the job market reduced the probability of a continuing pause to 30% in July from 43% and raised the likelihood of an increase to 70%.