Data showed the US economy added 172,000 jobs in May, far exceeding analysts’ consensus forecast of a modest 85,000. According to the Bureau of Labor Statistics report, the American labor market remains robust despite the inflationary shock stemming from the protracted military conflict in Iran.
Adding to the hawkish sentiment on Wall Street was a significant revision of previous jobs data. The April employment figure was revised up from 115,000 to 179,000, while the March figure was raised from 185,000 to 214,000. This means that over the last two months, the economy recorded 93,000 more jobs than previously estimated. The primary gains came from the public sector, healthcare, and the hospitality industry, while the financial sector reported job losses.
This data has prompted markets to urgently reassess their expectations for the Federal Reserve’s monetary policy. Traders are now pricing in at least one interest rate hike by the end of 2026, whereas earlier, investors anticipated that borrowing costs would remain unchanged, with tightening pushed to early 2027. The unemployment rate remained steady at 4.3%, and average hourly earnings increased by the expected 0.3%. Analysts believe that this will prevent the regulator from taking overly aggressive measures.
The bond market reacted immediately to the strong report. The yield on two-year US Treasury bonds, which are most sensitive to the Fed’s rate trajectory, jumped by 6.5 basis points to 4.115%. Meanwhile, the yield on the benchmark 10-year Treasuries rose by 5.3 basis points, closing at 4.53% compared to 4.477% prior to the jobs report’s release.
