The North American employment picture received a major boost today as both the US and Canada delivered much stronger than expected labor market reports, reinforcing the view that economic activity remains resilient despite concerns about slowing growth and rising interest rates.
In the United States, nonfarm payrolls rose by 172,000 jobs in May, nearly double the consensus estimate of 85,000 jobs. Adding to the strength, the previous months were revised higher with a total of 93,000 jobs, while the unemployment rate remained steady at 4.3% and wage growth remained steady. The report noted that hiring momentum remains intact and downplayed expectations that the Federal Reserve will be in a position to ease policy anytime soon. Treasury yields rose after the report, the US dollar rose, and stock markets came under pressure as investors repriced interest rate expectations.
The Canadian labor market also surprised to the upside. Employment rose by 87,800 jobs versus expectations for an increase of just 10,000, while the unemployment rate fell sharply to 6.6% from 6.9%. The strength was particularly encouraging because it was driven by an increase of 154,000 full-time jobs, which offset the weakness seen earlier in the year. Job gains were broad, led by construction, transportation, warehousing, accommodation, food services, information and entertainment, and manufacturing. The main area of weakness remained wholesale and retail trade.
Together, these reports paint a picture of two labor markets that remain much more resilient than expected. This is the good news.
The not-so-good news for policymakers is that stronger employment data reduces pressures for further monetary easing. In the US, markets have pushed Treasury yields higher and expectations have increased that the Fed will keep rates high for longer and possibly raise interest rates towards the end of the year (which would be a major reversal from just a few months ago). While in Canada, the report reinforced expectations that the Bank of Canada may remain on hold after the latest easing cycle. Currency markets reflected the strong Canadian data, with USD/CAD moving modestly lower following the release of this report, although USD gains from the stronger US report capped the downside.
A stronger-than-expected US jobs report sparked a sharp sell-off in the Treasury market as traders lowered their expectations for a near-term interest rate cut from the Federal Reserve. The move was led by the front end of the yield curve, reflecting a repricing of Fed policy expectations. The yield on the 2-year Treasury note rose 10.0 basis points to 4.15%, while the yield on the 5-year Treasury note rose 7.9 basis points to 4.268. Longer-term yields also rose, with the 10-year benchmark yield rising 5.5 basis points to 4.530%, and the 30-year yield rising 2.0 basis points to 4.996%. The sharp rise in short-term yields highlighted the market’s view that a resilient labor market and still-high inflation pressures could keep the Fed on hold for longer than previously expected.
Stocks were mixed to start the day with the Dow Jones rising and the S&P and Nasdaq falling (the Nasdaq was down about 300 points before the jobs report). The jobs report sent stocks lower on the back of rising yields Concerns about the week’s events with Alphabets’ $85 billion equity float are a reminder that AI will cost a lot, and that cost is now impacting shareholder value as stock values decline. In the past, equity holders have benefited from stock buybacks as opposed to dilution. Now with the increase in the number of shares, this idea has been reversed
The declines began to accelerate as the S&P and NASDAQ closed below their 200 hour moving averages for the first time since April 2026. For the S&P, the 200 hour moving average comes in at 7,404.33. The closing price was 7383.73. For the Nasdaq, the 200 hour moving average is located at 26069.49 with the closing price well below this level at 25709.43.
There were a number of losing stocks that fell today by more than 10%, including:
In a unique week, Marvel Technology was one of the worst performers today with a decline of -16.74%, but one of the best performers for the week with a gain of 28.52%. And in a sign of the madness, its stock is still up 210% for the year. This week the stock price reached $324.20 before closing the day at $263.47.
The US dollar was stronger today, with the Australian and New Zealand dollars the hardest hit against the US dollar. Below is a video of the weekend, showing the technical aspects of this pair as the trading week comes to an end.
It showed the ranking of major currencies’ losses against the dollar
- Japanese Yen -0.17%
- Canadian Dollar -0.19%
- British Pound -0.60%
- EUR -0.78%
- NZD -1.19%
- Australian Dollar -1.23%
The gold price reacted negatively to the rise in yields and the rise in the dollar.
- Gold fell $147.17 or -3.29% on its worst day since March 20. Over the course of the week, the price fell -4.614%
- Silver fell by -$6.02 or -8.15% (its worst day since May 15). The price decreased during the week by -9.837%
- Bitcoin continued its downward move and fell more than 16% this week, its worst one-week decline since October 2022.
Remember what happened yesterday, when Treasury Secretary Besent said he wished the employment report had been released the day before. While he denied having any prior knowledge of the numbers, the comment seems particularly interesting in hindsight.
Ironically, what would normally be considered good news for the economy turns out to be bad news for the market. A stronger-than-expected jobs report sent Treasury yields sharply higher as investors reassessed the likelihood of a near-term interest rate cut from the Federal Reserve. The result was a broad sell-off in the stock market, with high-tech and artificial intelligence stocks leading the decline.
It raises an interesting question: Did some insiders have a rough day today?
Markets will then prepare for Kevin Warsh’s first meeting as Fed Chairman, but before that, CPI data will be released next week with expectations for a core gain of 0.5% and a year-on-year rise to 2.9% from 2.8%. The headline is expected to reach 4.2% from 3.8% last month.
The Bank of Canada is expected to keep interest rates unchanged but with the strong jobs report it will be interesting to see if there is a turnaround. The European Central Bank will also meet and the market has priced in a 25 basis point rise. This has already been well communicated from policy makers.
