What Economists Said About the Blowout Jobs Report

Economists reacting to the May jobs report see lower odds of an economic slowdown—and less chance of Federal Reserve interest-rate reductions in 2024.

Going into Friday morning’s report, a streak of weaker-than-expected economic indicators over the past two weeks had prompted some hand-wringing about a softening U.S. economy, with data still solidly in expansion territory but the trend moving in the wrong direction.

A blowout May employment report from the Bureau of Labor Statistics appears to have calmed those concerns for the time being.

“The bigger-than-expected 272,000 gain in non-farm payrolls in May will soothe recent fears that the bottom had suddenly dropped out of the economy,” wrote Capital Economics Chief North America Economist Paul Ashworth on Friday. “With average hourly earnings increasing by 0.4% m/m last month, the Fed will remain focused on the upside risks to inflation rather than the downside risks to the real economy.”

While the headline numbers are uncontroversially strong, under the surface of the report are a few conflicting indicators that leave room for interpretation.

“The May jobs report is a Rorschach blot,” wrote Bill Adams, Chief Economist for Comerica Bank. “Optimists about the growth outlook will see solid payrolls growth as a sign the expansion continues unabated. Pessimists will focus on the unemployment rate’s uptick to the highest since early 2022, the increase in part-time employment, and the dip in temporary employment, which is often a leading indicator of broader job market weakness.”

For the Fed, the report is likely to keep officials in wait-and-see mode before changing interest rates. The Federal Open Market Committee next meets on June 11 and 12.

“One step forward, two steps back,” wrote Seema Shah, Chief Global Strategist at Principal Asset Management. “Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut. Not only has jobs growth exploded again, but wage growth has also surprised to the upside—both moving in the opposite direction to what the Fed needs to begin easing policy.”

Following Friday’s jobs report, interest-rate futures markets dialed back on bets that the federal-funds rate would fall this year. Pricing implied practically no chance of a cut in June or July, then a roughly 55% chance for September. That’s down from 70% odds of a cut priced in on Thursday.