Instant Reaction: US Adds 172,000 Jobs, Boosting Bets on Fed Rate Hike by Year-End

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**Alexis** (0:20)
And the May unemployment report hitting the Bloomberg terminal, and it shows a big jump in the number of jobs added to this economy in the month of May. We added 172,000 jobs. This is blowing away estimates of 88,000, even the whisper number, which was for 99,000. And this is compared to the 115,000 jobs we added in the prior month. Going through this report, we've got the unemployment rate holding steady at 4.3%. That was expected. As for average hourly earnings, not much movement there at all, up 3.4% right in line with estimates. And a bit lower than the month prior, when we saw that move up 3.6%, so again, wage is not keeping pace with inflation, which is now at 3.8%.
And we have got, also want to take a look at the labor force participation rate, again, in line with estimates at 61.8%, so unchanged from the prior month. But again, the headline number here, the economy adding many more jobs than expected, 172,000 in the month of May. The estimate was for 88,000, the unemployment rate holding steady at 4.3%.
And that's a look at the May jobs report, Tom and Paul.

**Tom Keene** (1:29)
Alexis, thanks so much. Bloomberg Surveillance on this jobs day across this nation. Brought to you by IBKR for the past three years. Interactive brokers, individual clients, averaged 24.3% annually, beating the standard in poor's 500, lower costs and access to 170 plus global markets. It matters. Visit ibkr.com/performance.
So Paul, I go to the yield space. You got to off this. It's a jump condition, five basis points, 452 on the 10-year, 5.01 on a 30-year bond, based on what Priya Misra said, you know, X number of minutes ago, like you're one third of the way to her tension.

**Paul Sweeney** (2:11)
Exactly, right. And on the short end, Tom, which is kind of reflects where maybe the Fed's thinking about up six basis points on the two-year treasury, 4.1% and futures S&P off 45, Tom.

**Tom Keene** (2:22)
Claudia Sahm with us here for a few minutes of perspective. Claudia, I get the idea that non-firm payrolls are tough to call, but I got a 93,000 plus two-month payroll revision.
And what really pauses me is even the under-employment rate came down from 8.2 to 8.1 percent. How does a chairman respond to this when he's cutting the curtains for the new office?

**Claudia Sahm** (2:55)
Right. Well, I mean, you know, it's good news on adding jobs. I think one for the Fed, this isn't such a worrisome print in that wage growth was still pretty moderate. We're still seeing slowing in wage growth. So the Fed is not anti-jobs. They're anti-inflation, right? Like, so if you're not seeing those cost pressures push in, this can be, these are still pretty modest numbers in terms of adding payrolls. They're much better than what we saw last year.
But so I think this looks like solid report.

**Tom Keene** (3:27)
Right.

**Claudia Sahm** (3:27)
Unemployment stays low. Like you said, underemployment ticks down a bit and wage growth is still slowing.
So in terms of this being some inflationary pressure, I just don't see it here.

**Tom Keene** (3:38)
Unfair here with two minutes into this to parse it and all, but I got a three-month moving average of non-farm payrolls folks from another time and place, 188,000. Do you assume, Dr. Sahm, that this will be revised down in six months or 12 months?

**Claudia Sahm** (4:01)
No. And I don't think we should, even though we've seen in the last few years, our annual revisions have been pretty substantial. Down revisions, there's research coming out of Cleveland Fed that says these aren't anomalies. We haven't broken the model in terms of these surveys always being prone towards down revision. And actually we've gotten some indication from administrative data that we might actually get an upward revision for last year when that comes in in the spring.
So I think we can take these numbers for what they are. And in particular, if you look past three months, averaging up around 100,000, we saw some upward revisions. I mean, this really does look, if nothing else really puts the exclamation point on a stabilization in the labor market relative to last year.

**Tom Keene** (4:43)
Paul, can I do a shout out to our collective set of guests? Yeah. And that they have been talking for two or three weeks, the directional tone of this report.

**Paul Sweeney** (4:53)
Yep, the labor market. Consensus is pretty solid there. So Claudia, you called out wages, 3.4% kind of annualized growth. But then I look at next Wednesday, we're going to get a CPI print. Consensus there is for like 4.2% growth in CPI. So wages are not keeping up with inflation.