The North American employment picture got a notable boost today as the United States and Canada both reported stronger-than-expected labor markets, lending credence to the view that economic activity remains resilient despite concerns about slower growth and higher interest rates.
In the United States, nonfarm payrolls increased by 172,000 in May, nearly double the consensus estimate of 85,000. Adding to the strength, the previous months were revised up by a combined 93,000 jobs, while the unemployment rate remained steady at 4.3% and wage growth remained steady. The report suggested the pace of hiring remained intact and reduced expectations that the Federal Reserve would be in a position to ease policy any time soon. Treasury yields rose following the release, the US dollar strengthened, and equity markets came under pressure as investors reassessed the outlook for interest rates.
The surge in Canada’s labor market also surprised. Employment increased by 87,800 jobs, compared with the expected gain of only 10,000, while the unemployment rate fell sharply from 6.9% to 6.6%. This strength was particularly encouraging as it was driven by an increase of 154,000 full-time jobs, offsetting the weakness seen at the beginning of the year. Job gains were broad-based, led by construction, transportation and warehousing, accommodation and food services, information and entertainment, and manufacturing. The primary area of weakness was wholesale and retail trade.
Overall, the reports painted a picture of two labor markets that remain more resilient than expected. That is the good news.
The good news for policymakers is that strong employment data eases pressure for additional monetary easing. In the US, markets pushed Treasury yields higher and expectations increased that the Federal Reserve will keep rates high for longer and perhaps raise rates at the end of the year (this would be a big reversal from a few months ago). While in Canada the report strengthened expectations that the Bank of Canada may remain on hold after its recent easing cycle. Currency markets reflected the strong Canadian data, moving down modestly after the USDCAD release, although gains in the US dollar from the strong US report limited declines.
A stronger-than-expected US jobs report prompted a sharp selloff in the Treasury market as traders reduced expectations of a Federal Reserve rate cut in the near term. The move was led by the front end of the yield curve, reflecting a reassessment of Fed policy expectations. The 2-year Treasury yield rose 10.0 basis points to 4.15%, while the 5-year yield rose 7.9 basis points to 4.268. Longer-term yields also rose, with the benchmark 10-year yield rising 5.5 basis points to 4.530% and the 30-year bond yield rising 2.0 basis points to 4.996%. The sharp rise in short-term yields highlighted the market’s view that a flexible labor market and still-elevated inflation pressures could keep the Federal Reserve on hold for longer than previously expected.
Stocks were mixed early in the day, with the Dow higher and the S&P and Nasdaq lower (the Nasdaq was down nearly 300 points following the jobs report). While the jobs report sent shares lower as yields backed up, concerns about the week’s events, in which Alphabet released $85 billion of equity, are a reminder that AI is going to cost a lot, and that cost is now eating up shareholder value as equity is eroded. In the past, share buybacks used to benefit share owners, but now with the increase in the number of shares, this idea is being reversed.
The decline began to accelerate with the S&P and NASDAQ indices closing below the 200 hourly moving average for the first time since April 2026. The 200 hour moving average for the S&P index comes in at 7404.33. The closing price was 7383.73. The 200 hour moving average for the NASDAQ index is at 26069.49 and the closing price is well below that level at 25709.43.
There were several losers that dropped more than 10% today, including:
In a unique week, Marvell Technology was one of the worst performers today with a decline of -16.74%, but was one of the best performers of the week with a gain of 28.52%. Signaling the madness, its stock is still up 210% for the year. The share price reached $324.20 this week and closed today at $263.47.
The USD was strong today and the AUD and NZD were hit the most against the greenback. Below is the weekend video, which gives a technical outline of those two pairs as the trading week comes to an end.
Ranking of major currencies’ losses against the greenback revealed
- JPY -0.17%
- CAD -0.19%
- GBP -0.60%
- Euro -0.78%
- NZD -1.19%
- AUD -1.23%
Gold price reacted negatively to higher yields and a higher dollar.
- Gold fell $147.17 or -3.29% in its worst day since March 20. Price fell -4.614% for the week
- Silver fell $-6.02 or -8.15% (its worst day since May 15). Price fell for the week -9.837%
- Bitcoin continued its downward trend, falling by more than 16% this week, its worst one-week decline since October 2022.
Recall yesterday, Treasury Secretary Besant had remarked that she wished the employment report had been released a day earlier. Although he denied having any prior knowledge of the numbers, this latter comment seems particularly interesting.
The irony is that what was generally considered good news for the economy turned out to be bad news for the market. The stronger-than-expected jobs report pushed Treasury yields sharply higher as investors reassessed the likelihood of a Fed rate cut in the near term. The result was a widespread selloff in the stock market, with high-flying technology and AI stocks falling.
This raises an interesting question: Have today been a bad day for some insiders?
The market will prepare for Kevin Worsh’s first meeting as Fed Chairman, but before that, CPI data will be released next week with a headline gain of 0.5% and a rise of 2.8% year-on-year to 2.9%. Headline growth is expected to reach 4.2%, up from 3.8% last month.
The Bank of Canada is expected to keep rates unchanged but with the strong jobs report it will be interesting to see if any changes occur. There will also be a meeting of the ECB and the market has increased the price by 25 basis points. This has already been well stated by policy makers.
