In the current land of uncertainty the markets and investors find themselves in, the monthly Employment Situation report is ‘must-see TV’ and will remain that way for the foreseeable future. Yes, there are other measures of labor market activity out there, but doesn’t it always seem to come back to what the monthly jobs data revealed?

Case in point: last week. The stock and bond markets received two other sets of labor statistics, the monthly ADP report and weekly jobless claims, that created a sense of potential cooling in labor market activity. Indeed, the ADP release, which measures private employment, saw the headline increase not only come in visibly below consensus forecasts, but it also posted its smallest gain in two years.

This was followed up by the jobless claims number which revealed the number of claimants rising for two weeks in a row. This labor market gauge is perhaps more important to the outlook than the ADP report because it is one of the ten leading economic indicators. Interestingly, even though the number of claims has risen two weeks in a row, the absolute level is still roughly 100,000 below the figures that have been posted in the past leading up to a recession.

Due to the ADP and weekly claims data, there was a sense going into the May Employment Situation report that the numbers could show a slowing in labor force activity. In fact, in terms of bond market expectations, that is exactly what was being anticipated.

However, in terms of the headline figures (nonfarm payrolls & the unemployment rate), the data still revealed a resilient labor market setting. To provide some perspective, total nonfarm payrolls rose by a better than expected +139k in May, while the unemployment rate remained at 4.2%. In addition, from an inflation-watch perspective, wages were up more than expected with average hourly earnings rising +3.9% on a yr/yr basis.

It wasn’t all good news though. The prior two months’ tallies were revised downward by a total of -95k and the household survey within the overall report left a little something to be desired. For the record, the 3-mo. moving average declined to +135k from a pre-downward revision gain of +155k, but post-revision it has been on an upward trajectory the last two months.

The main conclusion of the May employment report is that it does not alter the Fed and rate outlook whatsoever. The FOMC, who meet next week, remain in a data dependent, wait and see mode for setting monetary policy. The monthly jobs numbers will more than likely keep the Fed Funds trading range at its current level until the September Fed meeting, at the earliest., with longer-dated Treasury Yields (30-year bonds) remaining skewed towards the 5% threshold, i.e. ‘normal’ levels.