{"id":191310,"date":"2023-06-02T09:45:00","date_gmt":"2023-06-02T13:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=191310"},"modified":"2023-06-02T09:55:51","modified_gmt":"2023-06-02T13:55:51","slug":"may-employment-report-was-best-of-both-worlds","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/may-employment-report-was-best-of-both-worlds\/","title":{"rendered":"May Employment Report Was Best Of Both Worlds"},"content":{"rendered":"\n

Today is an employment report day, and on any employment report today it is a professional hazard to start writing this comment before the report is released at 8:30 a.m. ET. That’s because the Employment Situation Report is almost always a market-moving report, so what you see in the equity futures market before 8:30 a.m. ET may not be what you see at all in the equity futures market after 8:30 a.m. ET.<\/p>\n\n\n\n

What was seen in the equity futures market before today’s report was strength. The S&P 500 futures were up more than 20 points and trading 0.5% above fair value.<\/p>\n\n\n\n

The positive bias was an offshoot of the Senate’s rapid passage of the debt ceiling bill by a 63-36 vote, continued strength in the mega-cap stocks, favorable — and outsized — responses to earnings reports from lululemon athletica (LULU)<\/strong> and MongoDB (MDB)<\/strong>, optimism that the economy can avoid a recession because of persistent strength in the labor market, and technical momentum after the S&P 500 quickly reclaimed a posture above 4,200 on a closing basis.<\/p>\n\n\n\n

Alas, the positive bias held intact after the release of the May employment report, which featured a 339,000 increase in nonfarm payrolls, according to the establishment survey, upward revisions to nonfarm payrolls for April and March, and a moderation in average hourly earnings growth.<\/p>\n\n\n\n

A peculiar aspect of this report, however, is that the number of unemployed, which is determined by the household survey, increased by 440,000. The labor force participation rate, meanwhile, held steady at 62.6% and the the unemployment rate jumped to 3.7% from 3.4% in April.<\/p>\n\n\n\n

The key takeaway from the report is that it featured strength in nonfarm payrolls that will help assuage concerns at this point about the economy suffering a hard landing, as well as a jump in the unemployment rate and dip in average hourly earnings growth on a year-over-year basis that should assuage some (certainly not all) of the Fed’s concerns about the tightness of the labor market and wage-push inflation going into its June FOMC meeting.<\/p>\n\n\n\n

In brief, it was a report that was the best of both worlds revolving around the two suns of the economic outlook and monetary policy.<\/p>\n\n\n\n

Currently, the S&P 500 futures are up 22 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 42 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 200 points and are trading 0.6% above fair value.<\/p>\n\n\n\n

The 2-yr note yield is up 11 basis points to 4.44% and the 10-yr note yield is up three basis points to 3.64%. The CME FedWatch Tool, which was showing a 28.5% probability of a 25-basis points rate hike at the June FOMC meeting shortly before the release, is now showing a 34.4% probability of a 25-basis points rate hike.<\/p>\n\n\n\n

Notable headlines from the May Employment Situation Report:<\/p>\n\n\n\n