The US economy added 139,000 nonfarm payrolls in May, exceeding market expectations of 126,000. However, previous data for April and March were collectively revised downward by 95,000—a correction substantial enough to offset the apparent positive performance. Despite unexpected wage growth, the overall labor force contracted. The “Fed Whisperer” noted that upon closer examination, the US unemployment rate is actually rising. While the May nonfarm data barely passed scrutiny, the “devil” lies in the revisions, with multiple indicators revealing underlying weakness in the labor market.
On June 6, data released by the US Bureau of Labor Statistics showed that employment increased by 139,000, the lowest since February but slightly above market expectations. Key revisions include: – April figures revised down from 177,000 to 147,000 (a reduction of 30,000) – March figures sharply revised down from 185,000 to 120,000 (a reduction of 65,000) The May unemployment rate held steady at 4.2%, matching expectations and maintaining a narrow range between 4.0% and 4.2% since May 2024. The number of unemployed persons remained virtually unchanged at 7.2 million. However, this stability came at the cost of a shrinking labor force, which declined from 171.1 million to 170.5 million—a reduction of approximately 600,000 workers. A significant discrepancy emerged between household and establishment surveys: household data indicated a plunge of 696,000 in employment, while establishment data showed job growth—highlighting inherent contradictions in labor market statistics. Wage data unexpectedly showed resilience, with average hourly earnings rising 0.4% month-over-month (double the 0.2% forecast) and 3.9% year-over-year (exceeding the 3.7% expectation). The average hourly earnings for private nonfarm employees reached $36.24. Nevertheless, this wage growth reflects tighter labor supply rather than robust demand. The report also revealed a reduction of 62,000 full-time positions. The nonfarm data partially alleviated market concerns about rapid corporate job cuts. Previously, businesses had adopted caution due to higher costs from tariffs and prospects of slowing economic activity. Following the data release, traders reduced bets on two Federal Reserve rate cuts within the year.The U.S. economy added only 33,000 part-time jobs, while full-time positions saw minimal growth, suggesting businesses may be reducing work hours to navigate economic uncertainty rather than expanding hiring. The labor force participation rate fell to a three-month low of 62.4% in May, down 0.2 percentage points from the previous month, with the core 25-54 age group also experiencing a decline.
Approximately 4.6 million workers remain in part-time roles for economic reasons, as they are unable to secure full-time employment due to reduced hours or limited opportunities. A New York Fed study highlighted that escalating tariffs under Trump’s trade policies are beginning to impact employment levels and capital investment, with signs of strain emerging in local enterprises. Manufacturing sectors flashed warning signs, losing 8,000 jobs—the largest decline this year—while transportation and warehousing saw negligible growth after two consecutive monthly drops. Federal government payrolls shed 22,000 positions in May, the steepest cut since 2020, bringing total reductions to 59,000 since January. Economists warn that federal spending cuts could endanger at least 500,000 jobs across contractors, universities, and public fund-dependent organizations. In contrast, healthcare added 62,000 jobs in May, exceeding its 12-month average, while leisure and hospitality grew by 48,000, driven largely by food services. Social assistance employment also continued its upward trend. Other major sectors—including mining, construction, wholesale trade, retail, information, financial activities, and professional services—showed minimal monthly changes. Employment among native-born workers fell by 444,000, with foreign-born workers declining by 224,000, indicating broad-based labor market contraction. According to ‘Fed Whisperer’ Nick Timiraos, unrounded unemployment data reveals a rise from 4.187% in April to 4.244% in May—the highest level since October 2021 (4.500%) and surpassing November 2024’s peak of 4.231%.Olu Sonola, Head of U.S. Economic Research at Fitch Ratings, stated: ‘All things considered, this is a decent jobs report. The labor market continues to slow steadily, but the sky is not falling. Given the backdrop of trade policy uncertainty, the Federal Reserve will find relief in this report. The tariff situation remains highly uncertain, and the Fed’s cautious stance will persist for months—potentially until September or October. The future inflation trajectory remains the most significant risk keeping the Fed constrained, and a resilient labor market further solidifies their wait-and-see approach.’
Market reactions: The U.S. Dollar Index briefly rose by about 10 points, currently at 99.15. U.S. stock futures saw a short-term increase, with Nasdaq 100 Index futures up 0.8%. The yield on the 10-year U.S. Treasury note briefly climbed, now at 4.407%. Spot gold fell by approximately $5, currently at $3351.75 per ounce. More updates to follow… Risk Warning and Disclaimer: Markets are risky; invest with caution. This article does not constitute personal investment advice and does not consider individual users’ specific investment objectives, financial situations, or needs. Users should assess whether any opinions, views, or conclusions herein suit their particular circumstances. Investments made accordingly are at the investor’s own risk.
