New jobs surge in the US - twice as many as expected. What's in the markets?

The number of jobs in the U.S. in May increased by 172,000, which was much higher than expected, according to the U.S. Bureau of Labor Statistics. The consensus forecast of economists surveyed by Dow Jones, provided for growth of the indicator by only 80,000, reports CNBC.

The U.S. economy added 179,000 jobs in April, according to revised data, bringing the cumulative gain over the past three months to the strongest in more than two years, Bloomberg calculated.

The unemployment rate remained unchanged at 4.3% in May.

Futures on S&P 500 and Nasdaq Composite indices intensified their decline after the release, stock exchange contracts on Dow Jones reduced growth. At the opening of trading, the S&P 500 fell by 0.9%, the Nasdaq Composite collapsed by 1.5%, and the Dow Jones lost 0.4%.

U.S. Treasury bond yields rose sharply. The yield on 10-year bonds - a key benchmark for mortgage, auto loan and credit card debt rates - rose five basis points to 4.534%, reaching its highest level since Ma. 21. The yield on two-year securities soared seven basis points to 4.115% - if such dynamics continue, it will be the biggest jump on the day of the publication of employment data since June 2025, Bloomberg writes.

The optimal scenario would be a moderately weak but not alarming report, Freedom wrote earlier. Too strong data will stimulate Treasury yields and reduce the assessment of the likelihood of the Fed easing monetary conditions. Friday's statistics signal that the regulator will leave interest rates unchanged at the next meeting to be held this month, Barron's agrees.

Moreover, the market has fully pledged in prices to raise the rate by a quarter of a percentage point by the end of the year, notes Bloomberg. And the probability that it will be raised at the Fed meeting on October 28 is now estimated at almost 70%.

"There's no argument for a rate cut with such a strong labor market, and Fed officials should focus on inflation risks because the economy is showing acceleration," CNBC quoted Fwdbonds chief economist Christopher Rapka as saying.

Consumer Price Index (CPI) data expected next week is projected to show core inflation rising to 2.9%, with the overall price level soaring 4.2% year-over-year, Bloomberg reports.

"It's going to be a challenging start for [new Fed chief] Kevin Warsh," Stephen Coltman, head of macroeconomics at 21Shares, told CNBC. - Given the current inflation and employment data, the discussion is quickly shifting from "When can the Fed cut rates?" to "Why isn't the Fed raising rates?" If the Fed moves to tighten, the markets will have a hard time digesting that, and such a reversal would likely cause a new spike in volatility across asset classes."

"We don't think a rate hike is imminent, but a few more of these jobs reports and a few more hikes will have to be our baseline scenario," warned Bloomberg Intelligence strategist Aira Jersey.

The Fed is likely to wait until at least the September meeting before "pulling the trigger," according to Stephen Brown of Capital Economics.

This article was AI-translated and verified by a human editor