Market Wire - US Job Growth Exceeds Expectations, Dollar Rises

Karl Schamotta, Chief Market Strategist: karl.schamotta@corpay.com

390,000 jobs were created in the United States last month - a number that is better than most observers expected, and one that suggests the economy’s momentum remains strong. According to data released by the Bureau of Labor Statistics this morning, the unemployment rate was unchanged at 3.6 percent in May, and the participation rate moved up to 62.3 from 62.2 percent in the prior month. 

Gains were (unsurprisingly) biggest in the leisure and hospitality sector, but the business services and transportation industries posted solid growth. Revisions subtracted a modest 22,000 jobs from the prior two months. 

Average hourly earnings rose 0.3 percent month over month, and are up 5.2 percent over last year. 

Ahead of the release, investors were positioned for a 325,000-job gain, with the unemployment rate seen hitting 3.5 percent, and earnings up 0.4 percent month over month. 

A deceleration in coming months could put pressure on the Federal Reserve to slow the pace of rate hikes, but the labour market remains historically tight, and policymakers remain far more concerned about sustained price pressures in the US economy. 

Treasury yields are up and the dollar remains higher on the week after the Cleveland Fed’s Loretta Mester and Vice Chair Lael Brainard poured cold water on the idea of an early-autumn pause, saying rates would likely continue to climb through September. Both openly acknowledged rising recession risks, but remained committed to tightening financial conditions in an effort to bring inflation pressures down.