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Stocks slide and dollar rallies as strong US jobs report dampens rate cut hopes – business live

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BOOM! US jobs report shows surge in hiring

Newsflash: The US economy added 272,000 jobs in May, much more than expected.

That’s a rather stronger report than economists had expected – with Wall Street having forecast an increase of around 185,000 jobs.

The latest non-farm payroll report shows that employment continued to trend up in health care; government; leisure and hospitality; and professional, scientific, and technical services.

The US Bureau of Labor Statistics also reports that the US unemployment rate rose to 4% in May, from 3.9% in April. That’s the highest rate since January 2022.

March and April’s jobs reports have been revised a little lower too.

The BLS says:

The change in total nonfarm payroll employment for March was revised down by 5,000, from +315,000 to +310,000, and the change for April was revised down by 10,000, from +175,000 to +165,000.

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Key events

The US dollar is pushing higher against sterling, knocking the pound down by almost three-quarters of a cent to $1.2722.

The White House council of economic advisors has published a thread on X, pulling out the key points from today’s jobs report:

Today’s employment report shows the U.S. economy added 272,000 jobs in May, well above expectations. Revisions to prior months’ estimates were relatively small on net. Through May, the average three-month gain in payrolls was a very healthy 249,000. 1/ pic.twitter.com/YRrsIjesEe

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Employment gains were widespread across industries, but were led by education and health, government, and leisure and hospitality sectors. See today’s blog on industry dispersion in employment gains for more details. 2/

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

The unemp. rate ticked up to 4.0% in May. The broadest measure of underemployment, U-6—including those working part-time for economic reasons and the marginally attached—remained steady at 7.4%. 3/ pic.twitter.com/RmcClUOaH7

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

The unemp. rate has been at or below 4.0% for 30 months, the longest such stretch since 1970.

The unemployment rate’s recovery and persistent low level stands out relative to prior recoveries, as it started much higher, fell further, and has stayed lower. 4/ pic.twitter.com/gCtFsoMEOB

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

The labor force participation rate (LFPR) fell 0.2 ppt to 62.5% and employment-population (EPOP) fell by 0.1 ppt to 60.1%. These declines were likely driven by young workers 16-24, whose EPOP fell by 1.2 ppt. 5/ pic.twitter.com/MSJJgbrid6

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Hhold. employment fell 456,000 when adjusted to payroll-survey basis. The figure shows a few recent months where these two series have similarly diverged. Analysts consider the payroll survey to send a more reliable signal with a 90% conf int of 130K compared to hhold’s 620K. 6/ pic.twitter.com/Jt4WydgXYE

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

May was another strong month for prime-age workers. The prime-age (25-54 year-olds) LFPR ticked up to 83.6%. 7/ pic.twitter.com/ENCgri65zT

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

For prime-age women, we saw record LFPR and EPOP for series that began in 1948. LFPR increased 0.1 ppt to 78.1% and EPOP increased by 0.2 ppt to 75.7%. 8/ pic.twitter.com/tRf7xkwHAb

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Nominal average hourly earnings growth was a bit stronger than expected at 0.4% in May. Year-on-year, nominal wage growth ticked up to 4.1%, still lower than the average in the last half of 2023 (4.4%), consistent with a slowly cooling labor market. 9/

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Real wages continue to rise, with yearly wage growth outpacing price growth for 12 months in a row. Inflation data for May have not been released yet, but wages likely outpaced inflation over the year in May too. 10/ pic.twitter.com/fOBmP3TstM

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Finally, in May, the unemployment rate of Black workers—which has been very volatile of late—ticked up to 6.1%. However, the 2.6 ppt gap between the Black and white unemployment rate remains below its 2019 average of 2.8 ppt. 11/ pic.twitter.com/P9UE0HqKsj

— Council of Economic Advisers (@WhiteHouseCEA) June 7, 2024

Women’s employment rates rose to another record high in May! What a historic recovery from the depths of the pandemic pic.twitter.com/BE3s6OpNc5

— Joey Politano 🏳️‍🌈 (@JosephPolitano) June 7, 2024

Today’s “very strong jobs report” has cast further doubt on the prospect of US interest rate cuts this year, reports James Knightley, chief international economist at ING:

He explains:

US May non-farm payrolls came in at 272k versus the 180k consensus and higher than any of the 77 forecasts submitted to Bloomberg – the range was 120-258k. Private payrolls rose 229k versus the 165k consensus expectation.

There were 15k of downward revisions to the past 2 months for headline payrolls, but this is still an undeniably strong set of numbers that has seen market interest rate cut expectations reduce significantly.

The gains were once again led by the usual suspects of private education & health services (+86k), leisure & hospitality (+42k) and government (43k). Average hourly earnings rose 0.4%MoM/4.1%YoY versus 0.2/3.9% in April and also hotter than expected. This jump likely received a boost from recent minimum wage increases in California.

Biden: the great American comeback continues,

The White House has issued a statement on the May Jobs Report, highlighting job creation under the current administration.

In it, President Joe Biden says:

The great American comeback continues, but we still have to make more progress. On my watch, 15.6 million more Americans have the dignity and respect that comes with a job. Unemployment has been at or below 4% for 30 months—the longest stretch in 50 years. And a record high share of working-age women have jobs.

I will keep fighting to lower costs for families like the ones I grew up with in Scranton. I’m fighting corporate greed by calling on corporations with record profits to lower prices—as Target and Walmart have for grocery prices. I’m fighting to make rent more affordable by building 2 million new homes. I’m fighting to lower the cost of health care and prescription drugs, like insulin and inhalers.

Congressional Republicans have a different vision—one that puts billionaires and special interests first. The Republican plan would increase inflation by repealing the Affordable Care Act, siding with Big Oil to raise utility bills, letting Big Banks rip off Americans, and blow up the debt by slashing taxes for billionaires. I will never stop fighting for Scranton—not Park Avenue.

A chart showing US non-farm payroll since January 2021 Photograph: ING
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There’s a possibility that the US Federal Reserve may not be able to cut interest rates at all this year, suggests Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin.

At the end of 2023, investors expected a flurry of rate cuts in 2024, but inflation has remained subbornly high while economic growth has also held up pretty well.

Mui says:

All in all, today’s bumper jobs number and sticky wage growth still skew toward the Fed keeping a tight policy stance. It will not give the Federal Reserve the confidence it needs to cut rates anytime soon.

Markets are still pricing in at least one rate cut by the end of the year but there is a real possibility of no cut at all this year. All eyes are on the Fed’s economic projections, including its expectations for the path of the Fed funds rate next week.”

Wall Street opens lower after hot jobs report

Photograph: Erik Pendzich/REX/Shutterstock

Wall Street has opened in the red, as today’s strong US jobs report dampens hope of an early interest rate cut.

The news that US payrolls swelled by a greater-than-forecast 272,000 in May, while average earnings rose by 0.4% in the month, is weighing on stocks.

At the start of trading, the Dow Jones industrial average of 30 large US companies lost 74 points, or 0.2%, to reach 38,811.99 points.

The broader S&P 500 index has dropped by 0.3%, while the technology-focused Nasdaq is down 0.35%.

David Goebel, investment strategist at wealth manager Evelyn Partners, says:

“This report caps off a mixed bag of a labour market signals this week that does little to make the Federal Reserve’s job easier.

“The headline non-farms number is a big upside surprise on the estimate, indicating a very healthy level of job creation. These gains were also broad-based, with the diffusion index, which measures the breadth of gains across industries, jumping to 63.4% in May from 56.6% in April.

“Stronger than expected wage gains also contributed to the prevailing sticky inflation story.

“At the same time, the unemployment rate ticked higher to 4.0%, its highest since January 2022. This looks to be a function of decreasing household employment, which fell 408k, because the participation rate took a dip to 62.5%, which would have exerted downward pressure on unemployment.

Today’s US jobs report is “a genuine surprise” compared with market expectations, says Daniele Antonucci, chief investment officer at Quintet Private Bank.

Antonucci adds:

Payrolls exceeded the highest predictions in the major forecasters’ polls, the unemployment rate held steady rather than rising, and wage growth was stronger than consensus both on a month-on-month and year-on-year basis.

The latest figures don’t show any degree of softening, which was the baseline market scenario. Taken at face value, they represent a hurdle to the view that the labour market is cooling off.

In turn, the implication is that the jobs picture is currently standing in the way of a Fed rate cut or two later this year.

To be clear, one number doesn’t make a trend and, on balance, the higher rates stay elevated for longer, the more likely it is economic growth and inflation will slow.

Jobs report ‘slams the door shut on a July rate cut’

What little hope there was of a US rate cut in July (and there was never much) has been squashed by today’s jobs report.

With job creation accelerating to 272,000 last month, and earnings growth rising too, Fed rate cut hopes have been doused.

Seema Shah, chief global strategist at Principal Asset Management, explains:

“One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut.

Not only has jobs growth exploded again, but wage growth has also surprised to the upside – both moving in the opposite direction to what the Fed needs to begin easing policy. We still expect the Fed to cut rates in September but another set of prints like today’s would likely also take that off the table. The positive news, however, is that with a labor market this strong, the US economy is nowhere near recession territory.”

The Household Survey, released by the US Bureau of Labor Statistics today, shows there were 6.6m unemployed people in America last month.

That lifted the unemployment rate to 4.0%

A year earlier, the jobless rate was 3.7%, and the number of unemployed people was 6.1m.

The May jobs report tells 2 different stories:

The “Household Survey” of workers shows unemployment ticking up to 4% due to fewer people employed.

The “Establishment survey” of businesses shows the huge +272,000 job gain in May. pic.twitter.com/RxBevbjIaE

— Heather Long (@byHeatherLong) June 7, 2024

Where were the 272,000 job gains in May?

Healthcare +68,000
Gov’t +43,000 (+34k in local gov’t)
Hospitality +42,000 (restaurants were +25k)
Professional +32,000
Construction +21,000
Social aid +15,000
Retail +13,000
Transportation +11,000
Finance +10,000
Manufacturing +8,000 pic.twitter.com/mAWKPQWtHT

— Heather Long (@byHeatherLong) June 7, 2024

The bigger-than-expected 272,000 gain in non-farm payrolls in May will soothe recent fears that the bottom had suddenly dropped out of the economy, say Capital Economics.

They add:

With average hourly earnings increasing by 0.4% m/m last month, the Fed will remain focused on the upside risks to inflation rather than the downside risks to the real economy.

Today’s US jobs report is “something of a mixed bag”, says Michael Brown, senior research strategist at Pepperstone.

A blowout +272k headline nonfarm payrolls print beating all forecasts is being somewhat overshadowed by a net -15k revision to the prior two months of data, in addition to a surprising rise in unemployment to 4.0%, the highest since January 2022.

Despite this, the report overall contained a hawkish bias, with hiring continuing apace, and earnings also growing at a hotter-than-expected 0.4% MoM, and 4.1% YoY, indicating that the labour market at large remains relatively tight.

Unsurprisingly, the market reaction has been an aggressively hawkish one, with Treasuries and equities both slumping, as the dollar rallies to fresh day highs.

Average earnings paid to US workers rose at a faster pace than expected last month, today’s jobs report shows.

That’s a boost to employees but a headache for the Federal Reserve.

Average hourly earnings rose by 4.1% year-on-year in May, and by 0.4% in the month alone.

That also makes an early interest rate cut less likely, as solid wage growth will support inflation.

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US dollar rallying

The US dollar is rallying, as investors conclude that today’s strong jobs report makes an early cut to US interest rates less likely.

The greenback has gained half a cent against the pound, pushing sterling down to $1.2738.

Where the US economy added jobs last month

Here’s a breakdown on where the US economy added jobs last month, from the Bureau for Labour Statistics:

  • Health care added 68,000 jobs in May, in line with the average monthly gain of 64,000 over the prior 12 months. In May, employment growth continued in ambulatory health care services (+43,000), hospitals (+15,000), and nursing and residential care facilities (+11,000).

  • Government employment continued to trend up in May (+43,000), in line with the average monthly growth over the prior 12 months (+52,000).

  • Employment in leisure and hospitality continued to trend up in May (+42,000), similar to the average monthly gain over the prior 12 months (+35,000). Employment in food services and drinking places continued to trend up over the month (+25,000).

  • Professional, scientific, and technical services added 32,000 jobs in May, higher than the average monthly gain of 19,000 over the prior 12 months. Over the month, employment increased in management, scientific, and technical consulting services (+14,000) and in architectural, engineering, and related services (+10,000). Specialized design services lost 3,000 jobs.

  • Social assistance employment continued to trend up in May (+15,000), primarily in individual and family services (+11,000). Over the prior 12 months, social assistance had added an average of 22,000 jobs per month.

  • In May, employment in retail trade continued to trend up (+13,000), about in line with the average monthly gain over the prior 12 months (+8,000). Building material and garden equipment and supplies dealers added 12,000 jobs in May, while job losses occurred in department stores (-5,000) and furniture and home furnishings retailers (-4,000).

The jobs reports that there was little or no change in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; transportation and warehousing; information; financial activities; and other services.

The US economy added 272K jobs in May 2024, much higher than a downwardly revised 165K in April, and well above forecasts of 185K

— Army Piper (@Armypiper) June 7, 2024

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