May jobs report shows hiring isn’t ready to cool

3 mins read

By Edward Moya  

A red-hot labour market remains and that should keep the pressure on the Fed, which will also delay second half of the year recession calls. ​

The May jobs report showed robust hiring, a significant increase in layoffs, and easing wage growth.

The last Federal Reserve messaging we got before the blackout period (officially starts Saturday) was positioning the central bank for a June ‘skip’, but that might be hard to do if the ISM Services index impresses and the May inflation report does not show the disinflation process is firmly in place.

US stocks are holding onto gains after a complicated NFP jobs report showed hiring isn’t ready to cool, layoffs are rising, and wage pressures seem to be easing. ​Traders expecting a “good news is bad news” reaction to this payroll report need to dig deeper into the BLS report.

NFP day is not just about the headline number, but also about the other components and what that says about the overall economy. ​

We are almost at the midpoint of the year and the U.S. economy is not showing strong signs that the second half of the year recession is coming. ​

Corporate America would have you expecting significant weakness would be here given all the pre-layoff announcements and warnings about a challenged consumer that is tapping their savings and driving up their credit card bills. ​

With too much strength still coming from the service sector, the economy doesn’t appear poised to break down quickly enough to trigger a recession this year, unless we are given a fresh shock. A resilient economy and consumer is short-term good news for the stock market. ​

US Data

US employers added 339,000 jobs in May, well above the consensus estimate of 195,000, the whisper number of 225,000 and the highest economist forecast of 250,000. ​

Robust hiring in May also included an additional net revision of 93,000 jobs for the prior two months. ​ The April report was bumped up from 253,000 to 294,000. ​

The Fed might choose to focus on the other parts of the NFP report, which showed the unemployment rate posted a hefty increase from 3.4% to 3.7% as 440,000 workers became unemployed. Average hourly earnings came in mostly in-line, with the year-over-year reading ticking lower to 4.3%. ​

The Fed has almost locked itself into a corner with a skip for the June meeting, but it should be very clear that it is not done raising rates. ​


Crude prices are having a strong finish to the week after the US jobs report showed the economy is not ready to head into a recession. ​ Oil was heavier throughout the earlier part of the week on disappointing Chinese data and expectations that OPEC+ would not be able to deliver more production cuts, despite the Saudi warning to short-sellers. ​ ​

With oil at uncomfortable levels for most energy production countries, no one wants to be short-crude going into a weekend OPEC+ meeting.

It seems the oil market is doubtful a consensus for another output cut can be reached between the Saudis and Russians, but traders should never underestimate what the Saudis will do and leverage during OPEC+ meetings. ​ ​ ​ ​


Gold is tumbling after a resilient labour market delays calls for a recession. ​

Gold was almost in the clear as a couple of Fed doves had markets convinced that policymakers would skip a June rate hike. ​ If the data cooperated, some traders were making the case that they might even be done.

The US economy is too resilient and that should keep the risk of more Fed tightening on the table. ​

The problem for gold is that even once markets are convinced the Fed is done, we will still have to see how much dollar strength we see as the Treasury refills its coffers over the next several months. There is too much money on the sidelines that still will prefer dollar-denominated assets. ​ ​ ​ ​


Bitcoin is holding steady after a busy week filled with a debt limit deal, a complicated jobs report that showed both robust hiring and surging layoffs, and as lawmakers inch towards figuring out how to regulate crypto.

A new bill, the Securities Clarity Act, is being discussed and could provide guidance that clarifies if some tokens are unregistered securities. ​ ​


Edward Moya is Senior Market Analyst, The Americas at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.