According to the report released by the US Department of Labor on Friday, May saw an addition of 272,000 non-farm jobs, which significantly exceeded expectations and could potentially weaken the momentum for a rate cut by the Federal Reserve. The unemployment rate also rose to 4%.
In comparison to April’s 165,000 jobs, the addition of non-farm employment in May far surpassed the Dow Jones’ general expectation of 190,000.
Simultaneously, the unemployment rate rose to 4%, breaking this level for the first time since January 2022.
Breaking down the specific industries, the healthcare sector led the growth, adding 68,000 non-farm jobs in May, followed by government employment (43,000) and leisure/hospitality (42,000). These three industries accounted for more than half of the total job growth.
Other industries experiencing significant job growth included professional, scientific, and technical services (32,000), social assistance (15,000), and retail (13,000).
Looking at the average hourly earnings, which is closely monitored as an inflation indicator, the increase in May was higher than expected, growing by 0.4% compared to the previous month and 4.1% year-on-year, surpassing the expected values of 0.3% and 3.9% respectively.
At the time of the report’s release, investors are closely watching for any signals that may prompt the Federal Reserve to cut rates. Due to inflation still being above the Fed’s target of 2%, policymakers have been hesitant to cut rates quickly.
According to Bloomberg, Eric Merlis, Managing Director and Co-Head of Global Markets at Citizens, stated that in light of the strong performance of the employment report, next week’s Consumer Price Index (CPI) will be a major focus.
“With market participants trying to predict the timing of changes in Fed rates, all eyes will be on the inflation data. This report did not add to the urgency for the Fed to cut rates soon,” Merlis remarked.
Currently, the market expects a rate cut in September for the first time, followed by another cut in December.
(This article was adapted from CNBC’s report.)