Last week’s employment report felt familiar. Not dramatic. Not weak enough to shift policy. Just more of the same pattern we’ve seen lately: solid headlines, soft details.
Nonfarm payrolls increased by 139,000, within market’s expectation. The three-month average is now at 135,000 — steady, but not particularly strong. Unemployment ticked up slightly from 4.187% in April to 4.244% in May. On the surface, not much to worry about.
But when you look deeper, things are more mixed. The household survey showed a big drop: 696,000 fewer people employed, and the labor force shrank by 625,000. That means both the number of people working and the number of people looking for work fell. In statistical terms, both the numerator and denominator of the unemployment rate declined — a detail easy to overlook, but important.
Average weekly hours stayed flat at 34.3, while wages rose a little faster than expected — up 0.42% month over month. Labor force participation slipped from 62.6% to 62.4%. It’s a small drop, but part of a longer, gradual slide.
Once again, we saw a big split between the two main employment surveys. The household survey says jobs are disappearing (-696,000). The establishment survey says they’re still growing (+139,000). That gap is getting harder to ignore.
Some of this might be noise — disruptions from the “Liberation Day”, for example. Some of it might be real — like fewer immigrant workers due to tighter policies, especially affecting sectors like construction and hospitality. The drop in immigrant workers also helps explain the job increases in those industries.
Other signs point to softness, too. Government employment fell for the 4th consecutive month. Small business hiring is down, according to both the household survey and the NFIB report. And jobless claims, both initial and continuing, are rising.
Putting all this together, it doesn’t give the Fed a clear reason to cut rates anytime soon. If anything, the odds of a rate cut in June or July just got lower.
Still, markets shrugged it off. Despite Thursday’s noisy back-and-forth between Trump and Musk, by Friday the S&P 500 had fully recovered — closing above 6,000 for the first time since late February.
Now all three major indexes (S&P 500, Nasdaq, and Dow) are in positive territory for the year.
Meanwhile, the 10-year treasury yield has been moving sideways between 4.3% and 4.6%. Neither wage growth nor political drama has been enough to push it out of that range. At this level, yields don’t pose much of a threat to risk assets. But the question is: how high would they have to go before that changes?
Not long ago — in early April — it felt like the market was sliding. Now it’s edging toward new highs again. It’s a good reminder that things can turn around faster than we expect.