22 basis points! Expectations for a Fed rate hike in July are heating up, and the signals for non-farm employment are complex.
The Fed's forward rate agreement has increased market expectations of a rate hike by the Fed in July, with a rate hike pricing of 22 basis points.
On Friday, the US released its non-farm payroll report.
Overall, the number of non-farm jobs far exceeded expectations, but the unemployment rate has risen slightly.
Mixed Employment News
In May, the seasonally adjusted non-farm employment population in the US increased by 339,000, the largest increase since January 2023. This was higher than the expected 190,000 and the previous value of 253,000. This is consistent with the average monthly increase of 341,000 over the past 12 months.
The US unemployment rate in May was 3.7%, the highest since October 2022. This was higher than the expected 3.50% and the previous value of 3.40%.
The number of non-farm jobs added in March was revised up from 165,000 to 217,000, and the number of non-farm jobs added in April was revised up from 253,000 to 254,000. After the revision, the total number of new jobs added in March and April was 93,000 higher than the previous revision.
Employment growth occurred in the fields of professional and business services, government, healthcare, construction, transportation and warehousing, and social assistance.
Among the major worker groups, the unemployment rate for adult women was 3.3%, for black people it was 5.6%, which was higher than last month.
The unemployment rate for adult men (3.5%), teenagers (10.3%), white people (3.3%), Asians (2.9%), and Latinos (4.0%) remained almost unchanged.
The Federal Reserve faces a difficult decision. After a significant increase in employment, it is likely that the Fed will find it difficult to pause its rate hikes. Hourly wages have reached at least 0.3%, which is inconsistent with the 2% inflation rate, but much better than the 0.5% monthly increase recorded last month.
Slight Increase in US Stocks
The non-farm data far exceeded expectations, and US stock index futures rose slightly, with Dow futures up 0.52%, S&P 500 futures up 0.46%, and Nasdaq futures up 0.39%.
The yield on the US 10-year Treasury bond rose to 3.643%, up from about 3.615% earlier.
After the employment data was released, US short-term interest rate futures fell slightly, but traders are still betting that the Fed will maintain interest rates in June.
The Fed's swap trading has increased market expectations for a rate hike in July, with pricing reaching 22 basis points.