Key facts
- US employers added 172,000 jobs in May, surpassing economist expectations.
- The unemployment rate remained unchanged at 4.3%.
- Market odds for a Federal Reserve rate hike in December increased to 68.4%.
- US Treasury yields rose, with the 10-year yield breaking above 4.5%.
- The dollar index increased by 0.2% to 99.60.
- Stocks plunged following the jobs report, with the S&P 500 down 1.7% and the Nasdaq 100 down 3.2%.
The U.S. labor market demonstrated significant strength in May, with employers adding 172,000 jobs, substantially exceeding economists' expectations. This robust performance has altered market sentiment, increasing the probability of a Federal Reserve rate hike in December to approximately 68.4%, up from around 50% prior to the report. The unemployment rate held steady at 4.3%. In reaction, U.S. stock markets experienced a sharp decline, with the S&P 500 falling 1.7% and the Nasdaq 100 dropping 3.2%. Treasury yields also increased, with the 10-year yield surpassing the 4.5% threshold, signaling expectations of higher interest rates for a longer duration. The dollar index rose 0.2% to 99.60. The strong jobs data, coupled with recent acceleration in inflation largely due to energy prices, has diminished hopes for interest rate cuts this year, shifting the focus towards potential rate hikes. Analysts suggest that while the job market is positive for the economy, it removes the primary justification for the Fed to loosen monetary policy.