US Non-farm Payrolls rise by 390K in May versus 325K expected gain

• 390K jobs were added to the US economy in May, above the 325K expected. 
• This seemed to initially boost the buck, though wage growth metrics eased, easing pressure on the Fed. 
• Measures of labour market slack were mixed. 

The US economy added 390,000 jobs in May, according to the latest Non-farm Payrolls (NFP) report released by the US Bureau of Labour Statistics on Friday. That was above the median economist forecast for a gain of 325,000 jobs, though slightly lower versus April’s 436,000 gain (revised up from 428,000). The headline job gain was driven by a 333,000 gain in private sector employment, which was slightly above the 325,000 estimate. 18,000 of these were factory jobs, 59,000 of these goods-producing jobs, 36,000 of these construction jobs and 274,000 private service-producing jobs. Retail jobs fell by 60,700, while government jobs rose by 57,000. 

Despite the headline NFP beat, the Unemployment Rate remained steady at 3.6% versus an expected drop to 3.5%, while the U6 Underemployment Rate rose to 7.1% from 7.0% a month earlier. Average hours worked per week remained unchanged at 34.6 hours. The Labour Force Participation Rate rose slightly to 62.3% from 62.2% a month earlier, which explained why the unemployment rate failed to decline as expected. 

Average Hourly Earnings growth came in at 5.2% YoY in May, in line with expectations and below last month’s 5.6% reading. However, the MoM rate of Average Hourly Earnings growth was lower than expected at 0.3%, in line with April’s reading and below expectations for a rise to 0.4%. 

Market Reaction

The immediate market reaction has been for the US dollar to strengthen as a result of the stronger headline NFP number. But traders should be aware that sellers might soon come in, given the easing wage growth metrics that may be interpreted as taking some pressure off of the Fed to hike interest rates so aggressively. For now, the DXY is at session highs back to the north of the 102.00 mark.