The May jobs report showed that hiring remained strong, as employers added 339,000 payroll positions. However, unemployment jumped, hours worked fell, and wage growth moderated. The S&P 500 kept pushing higher in Friday stock market action, after Thursday's rally to a nine-month high on growing hopes that the Federal Reserve has hiked for the last time.
Jobs Report Hits And Misses
Employment gains easily topped Wall Street's 190,000 forecast. The private-sector added 283,000 positions, way above estimates for 165,000. Meanwhile, government employment rose by 56,000.
The average hourly wage rose 0.3% on the month, in line with forecasts. Annual wage growth of 4.3% came in shy of 4.4% forecasts amid a downward revision to April wage growth.
However, the average workweek fell to 34.3 hours, which is the shortest since April 2020, during the Covid lockdown. Even with a big increase in private-sector employment, the drop in the workweek means that total hours worked across the economy slipped 0.1% in May.
In fact, Labor Department data shows that economywide hours worked are negative over the past three months.
With so many new workers, yet fewer hours worked, Ian Shepherdson, chief economist at Pantheon Macroeconomics, wondered in his jobs report note, "What are all these people doing?"
The unemployment rate rose to 3.7% from 3.4%. Wall Street had expected a slight rise to 3.5%.
Solid hiring gains in March and April were revised up by a combined 93,000 jobs.
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
Household survey data showed the ranks of the employed falling 310,000 and unemployed rising 440,000 as 130,000 people joined the labor force. The labor force participation rate, a measure of those working or actively seeking work as a share of the 16-and-up population, held at 62.6%.
S&P 500 Reaction
The S&P 500 climbed 0.8% after the jobs report. The Fed's signal of a likely rate-hike pause may have investors feeling there's room for the S&P 500 to keep rallying.
The rise in the unemployment rate and slightly slower wage growth likely keep some pressure off the Fed.
On Thursday, the S&P 500 climbed 1% to 4221, the highest close since Aug. 19. That's just above key support at the S&P 500's 50-day moving average.
Through Thursday's close, the S&P 500 has rallied 18% from its Oct. 12 bear-market closing low but remains 12% below its all-time closing high on Jan. 3, 2022.
S&P 500 stock valuations have been supported by easing Treasury yields, with the 10-year yield down 20 basis points in the past four sessions amid mixed economic news. After the jobs report, the 10-year yield rose five basis points to 3.66%.
However, the resolution of the debt-ceiling fight could tilt the economy toward a brush with recession and put renewed pressure on stocks.
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More Jobs Report Details
Leisure and hospitality sector employment rose by 48,000. Private education and health services jobs grew by 97,000.
Construction jobs rose by 25,000. Temporary help services, after shedding a combined 10,000 jobs the prior two months, added back 7,700.
Soft spots included manufacturing, which cut 2,000 jobs, and information industries, which cut 9,000.
Adjustments for the presumed birth of new firms and death of old ones, added 231,000 jobs to the seasonally unadjusted total for May vs. 254,000 in May 2022 and 239,000 in May 2021. The key unknown is whether that guesstimate is on target at a time that credit has gotten much tighter and the economic outlook has become uncertain.
Fed Policy Impact Of Jobs Report
Markets were pricing in strong chances of a rate hike until the odds flipped on Wednesday afternoon. The catalyst was a clear call for the Fed to "skip" a rate hike at the June 13-14 meeting from Philadelphia Fed President Patrick Harker, who is seen as a centrist.
Shortly after the jobs report, markets were pricing in just 31.5% odds of a June hike. But markets see 65% odds of a hike at the July 25-26 meeting.
