U.S. Nonfarm Payrolls Rise 75,000, Wage Inflation Falls to 3.1%

The U.S. economy created fewer jobs than expected in May while the unemployment rate held steady and wage inflation unexpectedly eased.

Nonfarm payrolls (NFP) rose by 75,000 in May, below consensus expectations for 185,000, according to official government data released on Friday.

The jobless rate held steady as expected at 3.6%, the lowest level since December 1969 when it was 3.5%.

Wage inflation grew just 3.1% on an annualized basis, dropping from the prior month’s reading of 3.2. Consensus had expected no change.

U.S. futures pared gains immediately following the release with S&P 500 futures up 0.2% compared to an increase 0.3% ahead of the report.

The U.S. dollar index, which measures the greenback against a basket of major currencies, extended losses and was down 0.3% at 96.70, compared to 96.98 ahead of the release.

The benchmark 10-year Treasury yield was little changed from ahead of the report, quoting at 2.102%.

As trade tensions escalate between the U.S. and China, while President Donald Trump threatens Mexico with increasing tariffs, markets have steadily hiked bets that the Federal Reserve will cut rates this year.

Fed Chair Jerome Powell this week indicated a willingness to “act as appropriate to sustain the economic expansion”.

The worse-than-expected job creation, coupled with easing wage inflation adds to conviction that the U.S. central bank could ease policy.

While markets expect rates to hold steady at the June 18-19 policy meeting, fed fund futures are pricing in the first rate cut to arrive in July with another decrease in September. The probability of a third cut in December is holding near the 50% mark.