Key facts
- US employers added 172,000 jobs in May, exceeding expectations.
- The unemployment rate remained unchanged at 4.3%.
- Strong jobs data has reduced market expectations for Federal Reserve rate cuts.
- Market odds now favor a potential rate hike over a cut by year-end.
- US Treasury yields increased, with the 10-year yield above 4.5%.
- Major US stock indexes declined following the jobs report.
The US labor market showed unexpected strength in May, with employers adding 172,000 jobs, significantly surpassing the 88,000 anticipated by economists. The unemployment rate held steady at 4.3%. This robust hiring data has diminished market expectations for Federal Reserve rate cuts this year. Investors had been anticipating lower interest rates, but a strong labor market, combined with elevated inflation partly due to energy price surges and geopolitical tensions, complicates the Fed's easing plans. Market sentiment has shifted, with the CME FedWatch tool indicating a drop in the odds of a year-end rate cut to 0.6% and an increase in the probability of a rate hike to 68.4%. Major US stock indexes, including the S&P 500, Dow Jones Industrial Average, and Nasdaq 100, declined following the news. US Treasury yields also rose, with the 10-year yield surpassing 4.5%, suggesting expectations of sustained higher interest rates. Analysts noted that the strong jobs report effectively eliminated hopes for rate cuts.