May Jobs Report Pushes Back on Sooner-Than-Later Rate-Cut Hopes
As we expected, wage data accelerated, but job creation surprised to the upside.
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* Equities are tilting lower following stronger-than-expected May Employment Report figures.
* May job creation and wage data surprised to the upside, pushing back on sooner-than-later rate-cut expectations.
* The report leaves the Fed poised to reiterate higher for longer next week.
* We have our shopping list, and we’ll patiently wait for the right opportunities.
Alright folks, the report the market has been waiting for, the May Employment Report, has arrived and the findings surprised to the upside for job creation and wage gains relative to market expectations.
We shared our view that we were likely to see an upside surprise in year-over-year average hourly earnings, and we sure did. Not only did the May figure come in at 4.1% vs. the expected 3.9% but April was revised up to 4.0% as well. What we didn’t see coming, based on the May data received earlier this week, was the blowout jobs figure for May at 272,000, way ahead of the 185,000 consensus and the revised 165,000 figure for April.
While we may see that jobs figure revised somewhat lower in the coming months, at the moment it is leading the market to re-think expectations for rate cuts sooner than later and the 10-Year Treasury yield to rebound. That combination has led stocks lower in early trading.
Because of our concern for the potential surprise with the year-over-year average hourly earnings figure, we held off with the portfolio’s shopping list. We will continue to evaluate putting it to use, but with today’s data poised to result in the Fed saying it needs to see even “more good data” and for rates to remain higher for longer until that happens, odds are we will need to be patient for at least a bit longer.
