US NFP rise by 75,000 in May, 2-year Treasuries jump

Hiring in the States slowed down sharply in May, even if after a 224,000 gain during the previous month.

According to the Department of Labor, US non-farm payrolls rose by 75,000 in May, falling short of the consensus forecast for a rise of 190,000.

And gains in payrolls over the previous two months were revised down by a combined 75,000.

Average hourly earnings also missed economists' forecasts, with the year-on-year rate of increase slipping from 3.2% to 3.1%.

Nonetheless, following a much-weaker-than-expected print on consultancy ADP's private sector payrolls report for the same month, just two days before, Pantheon Macroeconomics's Ian Shepherdson had cut their forecast for Friday's official jobs report to 100,000.

On that occasion, Shepherdson had described the ADP report as "grim" but added "but it has to be seen in the context of April’s 263K increase [in private sector payrolls]."

Nevertheless, the ADP report had revealed sharp losses among small-sized companies, or those with fewer than 50 staff.

On that note, in a research report sent to clients on Friday, economists at JP Morgan had pointed out how trade tariffs would have the greatest impact on precisely such companies.

"Tariffs are a form of regressive tax on small-businesses and lower-income households.

"Unlike large-caps, small-businesses have limited pricing power (i.e., pass-down costs to larger suppliers and value conscious consumers) and are in constant need of liquidity (i.e., small-businesses on average hold cash balance of only $12,000 and many rely on personal credit cards and lines of credit for bridging the funding gap)."

In an immediate reaction to the payrolls report, the yield on the benchmark two-year US Treasury note was down by two basis points at 1.81% and euro/dollar was 0.28% higher at 1.13078.

-- More to follow --