The new US payrolls report for May beating expectations was the icing on the cake, pushing enthusiasm in the stock market to extremes. The economy added 139,000 jobs in September, beating the consensus estimate of 126,000. The April number was revised down to 147,000 jobs gained, and the trend suggests continuing resilience in the labor market. The unemployment rate holds at 4.2%. Many analysts think that while the US economy is slowing, it’s slowing at a more healthy rate.
Indeed, upbeat labor data helped energize a powerful opening on Wall Street this Friday. Consequently, the S&P 500 shot right back above the 6,000 level for the first time since February. Tech stocks have shot up, having a key hand in lifting US blue-chip equity indices. This increase reflects a broader trend in market performance.
The numbers related to average hourly earnings provided a happy shock. In reality, last month’s wage growth came in stronger than expected at 3.9%, with forecasts previously calling for a drop down to 3.7%. This development could indicate a more robust wage growth trend, which may help sustain consumer spending in a slowing economy.
Job Creation Exceeds Expectations
The US economy demonstrated its capacity for job creation in May, adding 139,000 positions, which stood out against analysts’ predictions. This figure is not just a sign of a better job market than expected but rather the economy’s ceiling level of strength. The positive revision of April’s job creation up to 147,000 only heightens this realization even as fears about the deceleration in the economy continue.
Further, the labor market is still showing signs of softening instead of a swift collapse. Whatever the case, experts have argued that though the economy is slowing, it’s just the right kind of slow. The monthly unemployment rate continues to hold at 4.2%. This means that job seekers continue to have options at their disposal, alleviating worries of an impending economic doom.
Employment numbers may be in constant flux, but that doesn’t diminish the importance of this caveat. While growth starts to sputter out, the underlying base is still proven and solid. Such conditions can create an important buffer during any future economic upheaval, granting businesses and consumers more agency and flexibility to adapt to new realities.
Market Reactions and Stock Performance
The stock market cheered the payrolls report, with US stocks opening sharply higher on Friday. The S&P 500 index has sailed past the 6,000 level and hit record highs. This new milestone represents its biggest return to this level since February. This increase demonstrates a strong appetite for stocks against a current backdrop of positive economic signals.
Tech stocks were instrumental in making this rebound possible for blue-chip equity indices. Their performance has long been even stronger than the returns of all-equal weighted indices and smaller market segments such as the Russell 2000. This remarkable trend indicates that investors are starting to feel bullish about tech again. In fact, they view it as the most important growth sector in today’s economic climate.
The market has changed its view on the trajectory of US interest rates. This change follows the most recent labor report’s effect on stock performance. The analysts predict that interest rates will rise to around 3.87% by end of the year. This figure is an upward revision from their previous forecast of 3.75%. This change foreshadows a mounting expectation of sustained economic expansion, though at a milder clip.
Economic Indicators and Future Projections
Despite the continuing strength of the labor market, the evidence on the rest of the economy is decidedly mixed. As a result, US rate cut expectations have seen a dramatic reversal according to recent reports. Projections have slumped from two cuts at the beginning of this week to just 1.7 cuts for 2025. This is a significant change that reflects a vastly different perspective on monetary policy and what it means for long-term economic prosperity.
US Treasury bond yields have shot up. Two-year yields increased by ten basis points, and ten-year yields by seven basis points. These movements almost always signal greater investor confidence in growing economic stability, but can be a symptom of rising fears over inflationary pressures.
As for the U.S. dollar, it has absolutely exploded above 99.00 on the index. As a result, the dollar is now the best-performing G10 FX currency on Friday. This resurgence is likely due in large part to increased investor optimism about US economic prospects and the surprise positive payrolls figures from the other week.