The May jobs report surprised the markets on the downside. Non-farm payrolls rose by only 38,000 jobs in May, which was well below the 155,000 expected. This is the lowest jobs number since September 2010. While the unemployment rate declined to 4.70%, the actual employment numbers were weak.
The Labor Force Participation Rate (LFPR) was the key in the unemployment rate, which fell to a four-decade low of 62.60%. The LFPR is the percentage of working-age persons in an economy who are employed or are unemployed but looking for a job.
The big takeaway from this report is that the odds of June rate hike are probably completely off the table.
The U.S. bond markets responded positively (as expected) to this poor jobs number. Both short-term and long-term bond yields are rallying hard this morning with the 10-year U.S. Treasury trading at around 1.700%.
With interest rates trending this low again, we remain biased toward locking in interest rates at this time. However, we would be surprised if interest rates went lower after this very poor jobs report.