Key facts
- May nonfarm payrolls increased by 172,000 jobs, exceeding forecasts.
- US interest rate futures increased the odds of a Fed rate hike in December to 68.4%.
- The unemployment rate remained at 4.3%.
- Treasury prices fell, pushing yields higher.
- The dollar index rose 0.2% to 99.60.
- The market expects the Fed to hold rates steady at its June meeting.
The U.S. economy showed strong employment gains in May, with nonfarm payrolls increasing by 172,000 jobs, exceeding Reuters poll forecasts of 85,000. This data has led to an increase in U.S. interest rate futures, raising the probability of a Federal Reserve rate hike in December to 68.4%, up from 48% before the report. The unemployment rate remained steady at 4.3%. Treasury prices fell, pushing yields higher, with the 2-year note yield rising 10 basis points to 4.15% and the 10-year yield up 6 basis points to 4.54%. The dollar index also rose 0.2% to 99.60. Despite the strong jobs numbers, the market still anticipates the Federal Reserve will hold interest rates steady at its upcoming June meeting. Analysts suggest that persistent inflation, partly driven by global oil prices, remains a key concern for the Fed, and that higher interest rates may not fully address these issues. Some commentary indicates that the labor market's resilience reduces the urgency for the Fed to cut rates, shifting focus to inflation.