Data released at 20:30 Beijing time on Friday showed that the US added many more jobs than expected in May, easing concerns about a slowdown in the labor market and reducing the urgency of Fed rate cuts.

The seasonally adjusted nonfarm employment population in May increased by 272,000 people, greatly exceeding the expected 185,000 and up from the previous growth of 175,000. The US unemployment rate rose to 4% for the first time since January 2022, higher than expected 3.9%, ending a trend of staying below 4% for 27 consecutive months. The hourly wage rate in May was 0.4%, above the expected 0.3% and up from the previous 0.2%.

After the data was released, the swap market no longer fully priced in the possibility of a Fed rate cut before December. US interest rate futures traders significantly reduced bets on a September Fed rate cut, now seeing a 55% chance that the Fed will reduce rates, down from the previous data showing a 70% chance.

US Treasury yields skyrocketed across the board, the US dollar index rose sharply by 60 points in the short term, and spot gold continued to fall in European trading, down more than 2% on the day, hitting a low of $2,313.53 per ounce. Spot silver plummeted 5% on the day.

At the same time, non-farm payroll employment in the US in March was revised downwards from 315,000 to 310,000, and in April it was revised downwards from 175,000 to 165,000. After these revisions, the total number of new jobs in March and April decreased by 15,000 compared to the previous revision.

According to the US Bureau of Labor Statistics, the total number of non-farm employment increased by 272,000 in May, higher than the average monthly increase of 232,000 in the previous 12 months. In terms of industries, employment in several industries, including medical care, government, leisure and hotel, professional, scientific, and technical services, continued to rise.

The labor market has exceeded expectations to a large extent over the past two years, providing momentum for the overall economy. People originally expected that this strong momentum would slow down as long-term high interest rates put pressure on recruitment plans and broader economic activity. However, the latest non-farm data seems to once again defy intuition. This is one of the last important reports that Fed officials will see before the meeting next week. The outside world generally expects the Fed to maintain borrowing costs at their highest level in 20 years during the meeting next week.

Economist Mohamed El-Erian said that the May employment report did close the door to the July rate cut. Marvin Loh, an analyst at State Street, also believes that any concerns about the rate cut in July are now quickly dispelled. The job market is still running at full speed, giving the Fed time to assess whether signs of weakness in other data will lead to a slowdown in summer job growth.

According to Michael Brown, Senior Research Strategist at Pepperstone, the May employment report in the United States was mixed, but overall it had a hawkish tilt. Recruitment continued to grow rapidly and wage growth was faster than expected, indicating that the labor market overall is still relatively tight. In short, the May employment report is unlikely to change the Fed's policy outlook. As expected, members of the Federal Open Market Committee (FOMC) will continue to focus more on the inflation aspect of their dual mandate and may reiterate next week that they have not yet gained the confidence they are seeking.

Peter Cardillo, Chief Market Economist at Spartan Capital Securities, said the May nonfarm report is obviously a very hot data release, but the part that the Fed is most interested in is the average hourly wage. In any case, this is a strong report that indicates that there are no signs of collapse in the labor market. This is beneficial to the economy and corporate profits, but may eliminate hopes of a rate cut in September and push back the timing of a rate cut to December. Investors will now await CPI data next Wednesday.

On the other hand, although the unemployment rate rose to 4%, analyst Ye Xie pointed out that the three-month average unemployment rate remained stable at 3.9% after steadily rising in recent months. The current trigger for the Sam rule is 4.1%, which has always been a reliable leading indicator of an economic downturn.

The May non-farm report was released after recent reports indicated unexpected weakness in the economy. Recent data on retail sales, overall consumer spending, construction, and industrial production has all been below economists' expectations. But most economists remain optimistic about the near-term outlook, believing that the economy is normalizing after a surprisingly overheated period last year, rather than deteriorating in a more worrisome way.

Editor/Emily