U.S. nonfarm payrolls surged by 172,000 in May, reinforcing expectations the Federal Reserve will delay rate cuts amid persistent inflation.
U.S. employers added 172,000 jobs in May, exceeding expectations and solidifying the Federal Reserve’s cautious stance on interest rate cuts. Upward revisions to prior months’ data further reduced the likelihood of near-term policy easing as inflation remains elevated and geopolitical risks persist.
Market expectations for a June rate cut had already dimmed before the report, but the strong jobs print pushed traders to price in a higher probability of a rate hike by late 2026. Fed Chair Kevin Warsh now faces internal challenges, with some policymakers questioning the framework used to assess inflation and growth.
Futures markets reflected the shift, with the CME Group’s FedWatch tool showing a 70% chance of a hike by year-end 2026, up from earlier projections. The data underscores the Fed’s focus on inflation over labor market strength for now.