Today's jobs report indicated a continuation of 2026's hiring expansion as non-farm payrolls jumped 172,000 for May after April's number was revised up to 179,000 (expectations were 80,000). Leisure and Hospitality led all categories (70,000 new jobs) with Health Care, usually the leader, adding 35,000. With inflation surging as energy costs remain elevated, Fed rate cuts are expected to remain on hold. The 10-year Treasury rose to 4.54%, up about 14 bps since Tuesday. Fed futures indicate a 70% chance of rate increases of 25–75 bps total in the next 6 months.
Deeper Dive on Jobs
Although 2026 has seen robust job growth, the growth has been concentrated in a few sectors (health care, local governments, hospitality, etc.). 2026 has also seen the "long-term unemployed" (defined as jobless for over 6 months) grow to 26% of total unemployed. That figure is up 45% from 2019 and 55% from 2023. This indicates that much of the job market is stuck in the "low hire, low fire" mode and that job growth is asymmetric. The long-term unemployed often end up with lower wage expectations and salaries due to desperation. Anticipated displacement in several industries due to AI adds to the angst and could become a factor in consumer behavior.
Next week: CPI and PPI as inflation takes center stage in preparation for the late June Fed meeting. Stay tuned…
