US nonfarm payrolls rose 339,000 in May, with unemployment beating estimates by 0.3% at 3.7% to complicate June’s Federal Reserve (Fed) policy move.
Average hourly earnings dovetailed with estimates, rising 0.3% month-on-month, while the number of new jobs created in April was revised upward to 294,000.
Experts Agree US Jobs Market is Still Resilient
The new numbers take the three-month average of nonfarm payrolls to 283,000 and mark the 29th consecutive rise in US nonfarm jobs.
Bill Adams of Comerica Bank said in the lead-up to the news,
“The job market is still quite solid, but not red-hot like a year ago.”
Economist Mohamed A. El-Erian affirmed this viewpoint on Bloomberg TV this morning.
“The US is a major engine of job creation.”
Professional services led job creation with 64,000 new jobs, followed by the government employing 56,000.
The release of May’s jobs report saw two-year yields rise five basis points, while returns from 10-year treasuries rose 3%. While strong job numbers pressure markets expecting more Fed interest rate hikes, equity futures recorded intraday gains.
S&P and Nasdaq 100 futures were up 50 basis points in premarket trading, while the Dow Jones Industrial Average rose 220 points.
Fed Must be Consistent, El-Erian Says
The Federal Reserve considers consistently strong job numbers and abnormal wage growth signs of persistent inflation. While wage growth slowed compared to last month’s 0.4%, robust May inflation, and jobless claims may pressurize the central bank to continue rising rates.
El-Erian said the Fed should increase rates to remain consistent with its goal to bring inflation to 2%. April’s CPI numbers revealed that consumer inflation was still well above that target at 4.9%.
The central bank will announce its next policy move when it meets on June 13-14.
Another factor likely to influence markets is ratifying a new US debt ceiling deal later today.
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