Robust jobs data adds to existing inflation concern

So much for a soft job market. While one report does not make a trend, last week’s employment data pointed to a strong US labor market, with healthy payroll growth and a steady unemployment rate at 4.3%. The economy added 172,000 jobs in May, far exceeding the forecast of 88,000. April job growth was also stronger than previously reported as it was revised higher to 179,000 from the previous 115,000. This strength, combined with inflation continuing to run above target, has reinforced market conviction that the next Federal Reserve monetary policy move is more likely a hike than a cut.

Other data last week highlighted a strengthening manufacturing sector, though not without some potential hiccups. The ISM manufacturing index rose to 54.0, from 52.7 previously — remaining in expansion territory. The increase was driven by broad-based improvement in new orders, production and employment components. However, the qualitative commentary was less upbeat. Data-center demand and the ongoing Iran war has pushed up prices; elevated uncertainty, rising energy prices and softening consumer demand weighed on business activity.