According to Bret Kenwell's commentary for eToro on the US employment data, “the May employment report was strong across the board, with job growth significantly above expectations and higher average hourly earnings.” to the estimates.” The data “calms some fears that the US is heading towards some kind of economic cliff”, although it also “likely reduces expectations of a Fed rate cut”.
The May jobs report was strong across the board, with job growth significantly above expectations and average hourly earnings coming in above estimates. It is the third consecutive reading for June that is significantly above expectations. Additionally, this report has been unexpectedly positive, especially given several disappointing jobs and economic data last month.
Given the increase in employment last month, it is surprising that the unemployment rate rose from 3.9% to 4.0%. According to the Federal Reserve's most recent summary of economic projections, that was the average forecast for the end of the year. Also interesting is that last month's employment report was revised downward (from 175,000 to 165,000).
On the one hand, the May jobs report calms some fears that the US is heading towards some kind of economic cliff, as we have seen weak economic data in the last month. On the other hand, this report probably reduces expectations of a Fed rate cut, even as we are seeing other G7 central banks cutting rates.
Today's data may lower rate cut expectations and serve as a short-term excuse for profit-taking in US stocks. But at the end of the day, a strong labor market isn't a bad thing, especially for an economy so dependent on consumption.
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