Key facts
- US nonfarm payrolls increased by 172,000 in May, exceeding expectations.
- The unemployment rate held steady at 4.3% in May.
- Average hourly earnings rose 0.3% month-over-month and 3.4% year-over-year.
- April's payroll figures were revised upward by 64,000 to 179,000.
- The U6 underemployment rate fell to 8.1%.
The U.S. economy added 172,000 nonfarm payroll jobs in May, significantly exceeding the 85,000 expected by economists and indicating a strengthening labor market. The unemployment rate held steady at 4.3% for the third consecutive month, matching expectations. Average hourly earnings rose 0.3% month-over-month and 3.4% year-over-year. April's payroll number was revised upward by 64,000 jobs to 179,000. The U6 underemployment rate decreased slightly to 8.1%. This data suggests a labor market that is in a 'slow-hire, slow-fire' equilibrium, with hiring cooling but layoffs remaining subdued. The strong report led to a rise in Treasury yields, with the 2-year note up 10 basis points to 4.15% and the 10-year yield up 6 basis points to 4.54%. Interest-rate futures now show a 65% chance of a Fed tightening in December, up from 48% prior to the report. The dollar index rose 0.1% to 99.53. Analysts suggest the report makes it difficult for the Fed to consider rate cuts and may increase the chances of a hike later in the year.