Evelyn Reynolds

Hiring was unexpectedly robust in May, with a gain of 272,000 jobs, but it wasn’t all good news: The unemployment rate ticked up, to 4 percent.The U.S. economy keeps throwing curveballs, and the May employment report is the latest example.Employers added 272,000 jobs last month, the Labor Department reported on Friday, well above what economists had expected as hiring had gradually slowed. That’s an increase from the 232,000-job average over the previous 12 months, scrambling the picture of an economy that’s relaxing into a more sustainable pace.Most concerning for the Federal Reserve, which meets next week and again in July, wages rose 4.1 percent from a year ago — a sign that inflation might not yet be vanquished.“For those who may have thought they would see a July rate cut, that door has largely been shut,” said Beth Ann Bovino, chief U.S. economist for U.S. Bank. Although wage gains are good for workers, she noted, persistent price increases undermine their spending power.Stocks fell shortly after the report was published, then recovered most of their losses by the end of the day. Government bond yields, which track expectations for Fed rate moves, rose sharply and remained elevated through the trading day.Wage growth ticked up in MayYear-over-year percentage change in earnings vs. inflation More

Beyond signaling a still-vibrant labor market, Friday’s jobs report at the very least adds to the narrative that the Fed doesn’t have to rush to lower interest rates.
Following the jobs numbers, futures traders cut bets on rate cuts. Pricing in fed funds futures pointed to almost no chance of a reduction at either the FOMC’s meeting next week or on July 30-31.

Traders work on the floor of the New York Stock Exchange during afternoon trading on June 03, 2024 in New York City. 
Michael M. Santiago | Getty Images

May’s surprising pace of job growth and wage rise added to the conviction that the Federal Reserve will stay on hold through this summer and possibly beyond.
The Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 272,000 for the month, considerably higher than the Wall Street consensus of 190,000 and well above April’s comparatively muted gain of 165,000. In addition, average hourly earnings rose 4.1% over the past 12 months, more than expected.

Beyond signaling a still-vibrant labor market, the data at the very least adds to the narrative that the Fed doesn’t have to rush to lower interest rates.
As inflation runs above the central bank’s 2% target, there’s scant evidence that higher rates are endangering broad metrics of economic growth.
“I’ve been a little flummoxed at the parlor game of when will the Fed start cutting,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “I’ve been more in the camp that neither of the components of the Fed’s dual mandate are pointing to the need to start cutting, and higher-for-longer means nothing could happen this year.”
The Fed’s “dual mandate” entails maintaining both full employment and stable prices.
Even with the unemployment rate rising to 4% in May, the labor market appears vibrant.

However, on the other side of the mandate, inflation is still running well above the Fed’s target. Most gauges have prices rising annually at about a 3% rate, down significantly from the peaks of mid-2022 but still running hot.

Lowering expectations

Following the jobs numbers, futures traders cut bets on rate cuts.
Pricing in fed funds futures pointed to almost no chance of a reduction at either the Federal Open Market Committee’s meeting next week or on July 30-31. From there, pricing indicates about a 50-50 chance of a September move, and only about a 46% probability that the Fed will follow up with a second cut before the end of the year, according to the CME Group’s FedWatch measure Friday afternoon.
All of those probabilities were down sharply from Thursday levels.
Investors, though, shouldn’t get too pessimistic, according to Rick Rieder, chief investment officer of global fixed income for money management giant BlackRock. He pointed to softness in demand for workers as shown by a report earlier this week indicating that job openings are continuing to decelerate.
Moreover, the household survey, which is used to calculate the unemployment rate, showed a decrease in employment of 408,000 and a continuing trend of part-time employment far outpacing full-time positions.
“And thus, the Federal Reserve’s mandate of price stability and full employment comes very much into balance,” Rieder wrote in a post-report analysis. “With these conditions, the Fed can lower the Fed Funds rate from very restrictive territory to merely restrictive positioning.”
“We believe the Committee can still start cutting the policy rate by 25 basis points at its September meeting, with a desire to get one more cut done this year, but inflation readings from here need to be supportive of this,” he added.
Similarly, Citigroup, long above consensus on Wall Street as the firm continued to expect aggressive rate cuts, said it now sees the Fed not moving until September but then continuing to cut rates from that point.
“The jobs report does not change our view that hiring demand, and the broader economy, is slowing and that this will ultimately provoke the Fed to react with a series of cuts beginning in the next few months,” Citigroup economist Andrew Hollenhorst wrote.

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The U.S. economy added 272,000 jobs for the month, coming out significantly higher than the Dow Jones consensus estimate of 190,000.
Employment swung higher in several industries, with health care leading the way again this month, followed by government and hospitality. These sectors also accounted for more than half of the month’s total gains.
Meanwhile, job losses occurred in department stores and furniture and home furnishings retailers.

Job growth in May was surprisingly strong, pushing back on lingering fears of a broader economic slowdown and likely slowing the Federal Reserve’s rate-cutting timeline.
The U.S. economy added 272,000 jobs for the month, coming out significantly higher than the Dow Jones consensus estimate of 190,000. That’s also higher than the average monthly gain of 232,000 over the last 12 months, according to the U.S. Bureau of Labor Statistics.

In May, employment swung higher in several industries, with health care leading the way again this month, followed by government and hospitality. The three sectors, respectively, added 68,000, 43,000 and 42,000 jobs, similar to trends seen over the past year. These sectors also accounted for more than half of the month’s total gains. The combined health-care and social assistance space netted more than 83,000 jobs in May.

The professional, scientific and technical services sector was also a bright spot in May, as it added 32,000 jobs during the month, which is much higher than the average monthly gain of 19,000 over the past 12 months.
On the other hand, social assistance employment trended higher as it added 15,000 last month, below the sector’s average of 22,000 jobs per month seen over the last year. Meanwhile, job losses occurred in department stores and furniture and home furnishings retailers.
Other major industries — including oil and gas extraction, construction, manufacturing, information and financial activities — all saw little or no change over the month in employment, per the report.
Investors walked away from the report discouraged that the Federal Reserve would cut rates in June, noting that the increase in job growth and above-average wage growth paints a picture of a fairly strong consumer.
“As has been the case recently, job growth was driven by non-cyclical areas like health care and government, but cyclical areas like leisure and hospitality were strong…this is likely to keep the Fed in a holding pattern, with the first cut likely coming only in September, assuming we continue to see softer inflation,” Sonu Varghese, global macro strategist at Carson Group, said on Friday.

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The unemployment rate rose for all racial groups except for white Americans in May.
The uptick in jobless rates was more pronounced for Black men than women. Black men saw their unemployment rate jump to 6.4% from 5.2%.
The number of eligible adults looking for jobs fell for white and Black workers, rose for Asian Americans and held steady for Hispanic workers.

A representative speaks with a jobseeker at a job fair at Brunswick Community College in Bolivia, North Carolina, on April 11, 2024.
Allison Joyce | Bloomberg | Getty Images

The unemployment rate for white Americans held steady from April to May, bucking the trend for all other racial groups, according to data released Friday by the Labor Department.
White unemployment remained at 3.5% last month, making the demographic group the only one that didn’t experience a rise in jobless rates from April to May. It also went against the overall unemployment rate, which edged higher to 4% from 3.9%.

Meanwhile, the jobless rate for Black Americans rose to 6.1% from 5.6%. For Asian and Hispanic workers, respectively, it rose to 3.1% from 2.8%, and to 5% from 4.8%.

“We obviously need to watch out for what’s happening with historically marginalized groups to make sure that the recovery gets experienced,” said Elise Gould, senior economist at the Economic Policy Institute.
But Gould isn’t particularly worried about the uptick in jobless rates for certain demographics just yet. “We’re not seeing any real divergence from trends there,” she added.
Gould noted that the trend was slightly stronger for Black men, who saw their unemployment rate jump to 6.4% from 5.2%, versus an increase to 5.2% from 5% for their female counterparts. The economist attributed this increase to labor force volatility and pointed out that the number has pretty much risen back to its previous levels from earlier this year.

Among white workers, the labor force participation rate crept lower, to 62.2% from 62.3%.

The overall labor force participation rate also fell to 62.5% from 62.7% and decreased to 62.9% from 63.2% for Black Americans. However, the metric rose to 65.3% from 64.7% for Asian Americans, while it held steady at 67.3% for Hispanic workers.
— CNBC’s Gabriel Cortes contributed to this report.

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Sometimes, the many numbers included in the government’s monthly jobs report come together to paint a clear, coherent picture of the strength or weakness of the U.S. labor market.This is not one of those times.Instead, the data released by the Labor Department on Friday was a mess of conflicting signals. It couldn’t even agree on the most basic of questions: whether the economy is adding or losing jobs.The report showed that employers added 272,000 nonagricultural jobs in May, far more than forecasters were expecting. That figure is based on a survey of about 119,000 businesses, nonprofit organizations and government agencies.But the report also contains data from another survey, of about 60,000 households. That data showed that the number of people who were employed last month actually fell by 408,000, while the unemployment rate rose to 4 percent for the first time in more than two years.The two surveys measure slightly different things. The employer survey includes only employees, for example, while the household survey includes independent contractors and self-employed workers. But that doesn’t explain the discrepancy last month: Adjusting the household survey to align with the concepts used in the employer survey makes the job losses in May look larger, not smaller.That means that the conflicting pictures come down to some combination of measurement error and random noise. That is frustrating but not unusual: Over the long term, the two surveys generally tell similar stories, but over shorter periods they frequently diverge.Economists typically put more weight on the employer survey, which is much larger and is generally viewed as more reliable. But they aren’t sure which data to believe this time around. Some economists have argued that the household survey could be failing to capture fully the recent wave of immigration, leading it to undercount employment growth. But others have argued that the employer survey could be overstating hiring because it isn’t accounting properly for recent business failures, among other factors. More

Wage growth ticked up in MayYear-over-year percentage change in earnings vs. inflation More

Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000.
The unemployment rate rose to 4%, the first time it has breached that level since January 2022.
Job gains were concentrated in health care, government and leisure and hospitality, consistent with recent trends.
Average hourly earnings were higher than expected as well, rising 0.4% on the month and 4.1% from a year ago.

The U.S. economy added far more jobs than expected in May, countering fears of a slowdown in the labor market and likely reducing the Federal Reserve’s impetus to lower interest rates.
Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000, the Labor Department’s Bureau of Labor Statistics reported Friday.

At the same time, the unemployment rate rose to 4%, the first time it has breached that level since January 2022. Economists had been expecting the rate to stay unchanged at 3.9% from April.
The increase came even though the labor force participation rate decreased to 62.5%, down 0.2 percentage point. However, the survey of households used to compute the unemployment rate showed that the level of people who reported holding jobs fell by 408,000.

“On the surface, [the report] was hot, but you’ve also got a bigger drop in household employment,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “For what it’s worth, that tends to be a more accurate signal when you’re at an inflection point in the economy. You can find weakness in the underlying numbers.”
A more encompassing unemployment figure that includes discouraged workers those holding part-time jobs for economic reasons held steady at 7.4%.
The household survey also showed that full-time workers declined by 625,000, while those holding part-time positions increased by 286,000.

Job gains were concentrated in health care, government and leisure and hospitality, consistent with recent trends. The three sectors respectively added 68,000, 43,000 and 42,000 positions. The three sectors accounted for more than half the gains.

A Now Hiring sign hangs near the entrance to the PetSmart store on December 03, 2021 in Miami, Florida.
Joe Raedle | Getty Images

Other significant growth areas came in professional, scientific and technical services (32,000), social assistance (15,000) and retail (13,000).
Regarding wages, average hourly earnings were higher than expected as well, rising 0.4% on the month and 4.1% from a year ago. The respective estimates were for increases of 0.3% and 3.9%.
Stock market futures lost ground while Treasury yields surged following the report.
“One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” said Seema Shah, chief global strategist at Principal Asset Management. “Not only has jobs growth exploded again, but wage growth has also surprised to the upside, both moving in the opposite direction to what the Fed needs to begin easing policy.”
Previous months’ reports saw small revisions: The March gain dropped to 310,000, down 5,000, while April’s saw a cut of 10,000 to 165,000.
The report comes with investors on edge over how long the Fed will hold its benchmark borrowing rate at the highest level in some 23 years. In recent weeks, policymakers have indicated a reluctance to cut anytime soon as inflation remains above the central bank’s 2% target.
The report was “certainly hawkish” from the Fed’s perspective, Sonders said, meaning that the data would make it less likely the central bank will reduce rates anytime soon.
Following the jobs report, traders in the fed funds futures market reduced the possibility of a cut in September to about 56%, according to the CME Group’s FedWatch measure. That was down about 12 percentage points from Thursday. The market-implied probability of a second move lower in December fell to about a coin flip about being around 68% a day ago.
The Fed has not lowered rates since the early days of the Covid pandemic in 2020 and hiked 11 times between March 2022 and July 2023. The benchmark federal funds rate is currently targeted between 5.25%-5.5%. More

Speaking at the St. Petersburg International Economic Forum (SPIEF), Putin said countries “friendly to Russia” were the ones that deserved special attention.
He added that Russia would seek to boost the share of settlements conducted in the currencies of BRICS countries, referring to an economic coalition of emerging markets which includes Brazil, Russia, India, China and South Africa.
Putin said payments for Russian exports in “so-called ‘toxic’ currencies of non-friendly states” had halved over the last year.

Russia’s President Vladimir Putin gestures as he delivers a speech during the Saint Petersburg International Economic Forum (SPIEF) in Saint Petersburg on June 7, 2024.
Anton Vaganov | Afp | Getty Images

Russian President Vladimir Putin said on Friday that nearly 40% of the country’s trade turnover is now in rubles as the share conducted in dollars, euros and other “non-friendly” Western currencies has fallen away.
Speaking at the St. Petersburg International Economic Forum (SPIEF), Putin said countries “friendly to Russia” were the ones that deserved special attention as they will define the future of the global economy, “and they already make up three-quarters of our trade volume.”

He added that Russia would seek to boost the share of settlements conducted in the currencies of BRICS countries, referring to an economic coalition of emerging markets which includes Brazil, Russia, India, China and South Africa.
Putin said payments for Russian exports in “so-called ‘toxic’ currencies of non-friendly states” had halved over the last year.
“With that, the share of the ruble in import and export operations is increasing, now standing at almost 40%,” Putin said, according to a translation.
Russia’s president detailed plans for a major overhaul of the country’s domestic financial market, including plans to double the value of the Russian stock market by the end of the decade, reduce imports and boost investment in fixed assets.
His comments come as the Kremlin leverages SPIEF to court new relationships with countries in Asia, Latin America and Africa.

The West has sought to cut off Russia’s $2 trillion economy in response to Moscow’s full-scale invasion of Ukraine in February 2022. Yet Russia’s economy is expected to grow faster than all advanced economies this year, despite several rounds of international sanctions.
In its World Economic Outlook in April, the International Monetary Fund said it expected Russia to grow 3.2% in 2024, exceeding the predicted 2.7% growth rate of the U.S. (2.7%). Germany, France and the U.K. are projected to log even lower economic expansions of less than 1%.
Russia says Western sanctions on its critical industries have made it more self-sufficient and that private consumption and domestic investment remain resilient. Ongoing oil and commodity exports to the likes of India and China, as well as alleged sanctions evasion and high oil prices, have allowed Moscow to maintain robust oil export revenues.

Ukraine war

Fighting has been raging in Ukraine since Russia launched its full-scale invasion over two years ago, with Moscow’s forces securing tactical advances in the north and northeast of Ukraine in recent weeks.
Western leaders on Thursday marked the 80th anniversary of D-Day by delivering an impassioned rallying cry for the continued support of Ukraine. At the D-Day international commemoration ceremony, U.S. President Joe Biden said it was “simply unthinkable” to bow down to Russia’s aggression, pledging no let up in U.S. support for the eastern European country.
French President Emmanuel Macron joined Biden in praising Ukrainian forces for their courage in their fight against Russian forces, adding, “We are here and won’t back away.”
Ukrainian President Volodymyr Zelenskyy, who was also in attendance at the ceremony on Omaha Beach, said on social media that the event served as a reminder “of the courage and determination demonstrated in the pursuit of freedom and democracy.”
“Allies defended Europe’s freedom then, and Ukrainians do so now. Unity prevailed then, and true unity can prevail today,” Zelenskyy added.
Earlier in the week, Putin reportedly said that Russia could begin supplying long-range weapons to unspecified actors for strikes against the West, in response to the lifting of some Western restrictions on Ukraine’s use of weapons to strike military targets inside Russia.
— CNBC’s Holly Ellyatt contributed to this report. More