Quick thoughts on May’s U.S. payroll report
Job growth roared back to life in May.
A net 280K non-farm jobs were created, outdistancing all expectations, and bringing the average monthly job growth over the last 3 months to 207K. Private service-providing industries drove the job gains.
We saw solid upward revisions for March and April jobs as well — a net +32K jobs.Wage growth accelerated; average hourly earnings grew 0.3% and 2.3% year-over-year.
Don’t sweat the unemployment rate rise to 5.5%, from a revised 5.4% for April. The increase was driven by a healthy increase in the labor force participation rate to 62.9% as discouraged workers re-entered the labor force.
Bottom line: The May payroll report supports the transitory slowdown story in the U.S. and points to a better second half performance. It’s not enough for the FOMC to pull the trigger in June, in my opinion, though September is still in their sights. S&P 500 futures are trading down, and the 10-Year Treasury yield is up 10 basis points to 2.4%.