By Jennifer Coombs
So, it appears that the tables have turned and now the hawks in the Federal Reserve definitely have some ammunition for the June meeting since the May jobs report was quite strong, not only in terms of payroll growth but also due to an uptick in wage pressures. For the month of May, nonfarm payrolls increased by 280,000 which was well above the consensus estimate for 220,000 and close to the top of the consensus forecast range of 289,000. Net revisions for the last two months were also higher by 32,000. While still far from robust, another positive sign was some more strength in the labor participate rate, which rose by 10 basis points to 62.9% for the month. The unemployment rate ultimately ticked 10 basis points higher to 5.5%, but this ultimately reflects an overall gain in the labor force for both those who found a job and those who are looking for a job.
Average hourly earnings came in at the high end of expectations, growing by 0.3% for the month, while year-over-year earnings are up 2.3%. This growth rate in wages was only matched twice during the recovery; the last time was back in August 2013. This substantial growth in wages will be the centerpiece of the Fed hawks' arguments at this month's meeting. While today's results won't be enough to make the Fed raise rates in June, it should be enough to spark a serious conversation about seeking a rate hike in September. Nevertheless, none of it is enough to stop the volatility today.