US nonfarm payrolls rose well above expectations in May

US nonfarm payrolls increased by 272K jobs in May, compared to downwardly revised April figure (165K from 175K) and spiked well above median forecast for 182K rise.

The Labor Department’s closely watched report on Friday also showed the unemployment rate ticked up to 4.0% from 3.9% in April, and identical forecast, cracking the 4% level for the first time since January 2022.

Average hourly earnings surprised at the upside, by 0.4% increase from 0.2% previous month and beating expectations for 0.3% rise.

Fresh acceleration in the US job growth, which is still quite tight despite softer numbers in recent months, adds to Fed’s narrative of keeping the rate cut on hold for some time, with market talks about the earliest time to start easing its monetary policy, while some economists do not expect any action until November

The Fed’s policymakers will meet next week and are widely expected to keep benchmark interest rate at 5.25%-5.50% range, unchanged since July 2023, though the central bank will continue to closely monitor conditions in the labor market and economic growth, to avoid keeping borrowing cost too high for too long and overcool the economy, in continuous efforts to push inflation back to its 2% target.