Key facts
- US nonfarm payrolls increased by 172,000 in May.
- The US jobless rate remained at 4.3% in May.
- Treasury yields surged following the jobs report.
- Stock indexes, including the NASDAQ, dropped in reaction to the data.
- President Trump and NEC Director Kevin Hassett argued the jobs report indicates growth without inflation and that the Fed has room to cut rates.
The U.S. economy showed stronger-than-expected employment growth in May, with nonfarm payrolls increasing by 172,000 jobs and the unemployment rate holding steady at 4.3%. President Trump and NEC Director Kevin Hassett argued that this signifies economic growth without inflation and that the Federal Reserve has room to cut rates. However, financial markets interpreted the data differently. Treasury yields surged, with the 2-year yield rising 10 basis points to 4.151% and the 10-year yield up 6 basis points to 4.537%. This repricing weighed on equities, with the NASDAQ index falling 2% to 26294.95, testing its 100-hour moving average. The S&P 500 is also testing its 100-hour moving average. Bond traders are concerned that a resilient labor market and sticky inflation could lead to higher interest rates for longer. Newly appointed Fed Chair Kevin Warsh faces an early test balancing growth, inflation, rising yields, and political pressure, especially as the Fed enters a blackout period before its upcoming FOMC meeting.