U.S. Added 272K Jobs in May, Blowing Past Estimates; Bitcoin Pulls Back From 2-Month High

Much stronger-than-expected employment gains in the US will likely weaken ideas that the Fed will cut interest rates soon.

Bitcoin, stock and bond tokens all fall in response to new data

Bloomberg’s chief economist suggests headline numbers mask underlying weakness in economy

The job market in the U.S. remained strong in May, with the government reporting 272,000 jobs added, well ahead of estimates of 185,000 and well ahead of April’s 165,000 (revised from a previously reported 175,000).

The May unemployment rate was 4.0%, against the forecast of 3.9% and 3.9% in April.

The price of Bitcoin {{BTC}} fell sharply from a two-month high of $72,000 in the minutes following the figures. At the time of writing, BTC was changing hands at $70,900, down 0.5% in the last 24 hours.

Wage data in this morning’s report shows average hourly earnings rose 0.4% in May; In contrast to the forecasts of 0.3% and 0.2% in April. On an annual basis, average hourly earnings rose 4.1%, compared to forecasts of 3.9% and 4.0% in April.

Interest rates have been on a downward trend for about the last five weeks after rising in the first half of 2024; because some recent US economic data pointed to a slowdown in both economic growth and inflation (this morning’s 10-year Treasury bond yield). The figures were at 4.30%, compared to the 2024 high of 4.71% in late April.

The decline in rates has been a boon for risky assets; US stock market averages rose to record highs, with the price of Bitcoin rising from around $60,000 to within close range of its record high of just above $73,500.

Ideas that major Western economies are about to enter a cycle of full-blown QE gained further ground this week when both the Bank of Canada and the European Central Bank cut their respective benchmark interest rates for the first time in several years. As for the US, the odds of a Fed rate cut have risen sharply recently; Investors had priced in a roughly 55% chance of a rate hike at or before the bank’s September policy meeting ahead of this morning’s report.

With today’s strong numbers, much of this sentiment is likely to reverse, at least in the short term. In addition to Bitcoin’s rapid pullback, the 10-year Treasury yield rose 12 basis points to 4.42% and U.S. stock index futures are pointing to a lower open. Looking at other indicators, we see that the US dollar gained 0.5% in value, while gold lost more than 2% in value.

Bloomberg Chief Economist Anna Wong has an interesting contrarian view on the data, arguing that the rise in the unemployment rate is a more important indicator of the reality of the employment situation. “[The government] The model for predicting job births and deaths, which added 231,000 jobs to nonfarm payroll pressures in May, lags behind the reality of rising business closures and falling job formations. “We think the current underlying pace of job gains is probably less than 100,000 per month.”