NFP React: NFP shows economy nowhere near substantial progress, Stocks rally, Dollar drops

US stocks rallied after a disappointing jobs report affirmed the Fed’s dovish stance since the economy is nowhere near close to showing substantial progress in the labor market.

Today’s nonfarm payroll report confirms the belief that the US economy is a long way from recovering all the jobs lost during COVID-19.  Before the April report, expectations were high that the economy would have a handful of months posting one million jobs created, with the US recovering the majority of the remaining 8 million job deficit by the end of the year.  The May nonfarm payroll report showed that the economy is still far from showing substantial progress with the labor market recovery.

The May jobs report showed 559,000 jobs were created, lower than the 800,000 whisper number (675,000 was the consensus estimate), while the April report was revised higher by 12,000 to 278,000 jobs.  The unemployment rate improved more than expected to 5.8%, but part of that can be attributed to a drop in the participation rate.

Labor market hiring remains modest at best and this should support a complete labor market recovery for the Fed at some point between the end of 2022 and early 2023.  The Fed regional surveys are showing the supply problem for employers is not getting any better and that will ultimately lead to wage pressures.  Now that half of the states have signaled they will eliminate the federal unemployment benefits, expectations will be high for June’s job report to be strong.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya