The Daily Froth: FLASH - May Payrolls

Research evidence excerpt

The Daily Froth: FLASH - May Payrolls

Economics

U.S. Economics

The Daily Froth: FLASH - May Payrolls June 5, 2026

May nonfarm payrolls were very strong, although today's data likely overstates the underlying pace of hiring.

Payrolls came in at 172k, above the 88k consensus estimate and our estimate of 105k. Private payrolls rose 120k

and government payrolls increased 52k (led by local government hiring). Private payroll gains were concentrated in

leisure and hospitality and healthcare, while goods-producing jobs also posted strong gains. The historical revisions

were perhaps the most eye-catching part of today's report, with a cumulative 93k upward revision to the prior two

months (64k to April and 29k to March).

Although job gains have been quite strong, there do not appear to be worrying signs to us that the labor market

is generating inflationary pressures (although 2Y yields have bounced 9bp on the data). Average hourly earnings

rose 0.32% MoM, up from 0.16% in April, although the YoY rate edged down to 3.4%. The unemployment rate

fell a few basis points to 4.296% from 4.337%. The Household Survey (used to calculate the unemployment rate)

has been running softer than the Establishment Survey, helping explain why the unemployment rate has remained

relatively stable despite robust headline job growth.

Seasonality likely biased the headline figure higher, and the World Cup may have provided some support

to leisure hiring, although it is probably too early for the bulk of that effect to appear in the data. Overall,

we continue to think job gains will broaden further, and that breakeven hiring is somewhat stronger than

consensus expects, allowing the labor market to remain in balance even with payroll growth running at a

firmer pace than many anticipate.