“Staggering” rise in US payrolls could slow Fed easing

(Reuters) -U.S. job growth accelerated much more than expected in May, keeping the Federal Reserve on track to not begin cutting interest rates .

The Labor Department said Friday the unemployment rate reached 4.0% for the first time since January 2022, while nonfarm job creation rose by 272,000 last month, well above the 185 000 forecast by economists polled by Reuters. Revisions showed 15,000 fewer jobs were created in March and April combined than previously reported.

MARKET REACTION:

STOCKS: S&P 500 e-mini futures fell 0.29%, pointing to a soft opening on Wall Street. BONDS: The 10-year U.S. Treasury yield jumped and ended at 4.414%; Two-year yields jumped to 4.855%FOREX: Dollar index rose 0.61%, while euro fell 0.62%

COMMENTS:

PADHRAIC GARVEY, REGIONAL HEAD OF RESEARCH, AMERICAS, ING, NEW YORK

“It’s really, really hard for the Fed to be anywhere near a rate cut… We see some weak numbers in terms of activity, but then we get to the big numbers like payroll and okay, the rate of Unemployment has increased, I understand, it’s up to 4%, but it’s not high.

“There is no urgency for the Fed to cut rates if the labor market is strong…we have plenty of information pointing to future weakness in labor markets, but the reality is that this is the number of the most important job we have. We just got it, it’s up to date and it’s pretty solid.

QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA

“The report suggests continued resilience in the labor market despite the rising unemployment rate…The market immediately responded with an uptick in the Treasury yield and a decline in the stock futures market.

The Fed could view these numbers as an obstacle to a September rate cut, because a strong labor market leads to a stronger consumer, one who can continue to spend and fuel inflation. »

BRIAN NICK, SENIOR INVESTMENT STRATEGIST, THE MACRO INSTITUTE, NEW YORK

“This is the type of report that will not cause the Fed to want to change its course of describing the need for higher interest rates and the potential for strong job creation to maintain upward pressure on inflation But they are not going to like the fact that the unemployment rate has increased to 4%. This is their end of year forecast and here we are with the May report. which it is already there.”

“The fact that these two numbers (payroll and unemployment rate) say very different things makes it very difficult for investors and even more difficult for central bankers to know exactly what is going on.”

“It’s likely we’ll get three more interest rate cuts, because if the Fed cuts interest rates in September because the unemployment rate is at 4.2% or 4.3%, then they’ll probably start having to cut back at every meeting.”

CHRIS ZACCARELLI, CHIEF INVESTMENT DIRECTOR, ALLIANCE INDEPENDENT ADVISOR, CHARLOTTE, NORTH CAROLINA (emailed note)

“Unemployment is making headlines…

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