| Interest Rate Market Snapshot | ||||||
| Federal Funds | SOFR | 2Y Treasury | 5Y Treasury | 7Y Treasury | 10Y Treasury | |
| 4.33% | 4.29% | 4.03% | 4.11% | 4.29% | 4.48% | |
-
Headline numbers in the May jobs report look solid: payrolls beat, unemployment holds, wages climb
-
But the household survey tells a sharply different story: employment fell by nearly 700,000, participation dropped, and the unemployment rate only held steady for all the wrong reasons
-
The number of unemployed Americans has now risen for four consecutive months — the longest stretch since 2009
-
Job revisions subtracted 95,000 from prior months, and the BLS continues to overstate topline job gains
-
Wage growth remains firm at 3.9% YoY — likely keeping the Fed on hold — but labor slack is quietly building
-
The market reacted by pulling back September rate cut odds, while swap rates and front-end yields moved modestly higher
SOURCE: BLOOMBERG
The Headline Numbers: Solid on Paper
The May employment report showed nonfarm payrolls rising by 139,000, beating the median estimate of 126,000. The unemployment rate held steady at 4.2%, and average hourly earnings rose 0.4% MoM / 3.9% YoY, continuing a steady — but not overheating — pace of wage growth
-
The payroll gain was modestly above consensus, but close to the 12-month average of 149,000 — signaling no material acceleration in hiring
-
Health care added 62,000 jobs, led by hospitals (+30,000) and ambulatory services (+29,000)
-
Overall, Education & health Services accounted for more than 63% of all jobs added to the economy last month
-
-
Leisure and hospitality added 48,000 jobs, with 30,000 of those in food services and drinking places
-
Federal government employment declined by 22,000, continuing a cumulative loss of 59,000 since January (DOGE’s impact continues)
-
Manufacturing lost 8,000 jobs, undercutting administration messaging around onshoring and U.S. industrial revitalization
Importantly, the March and April payrolls were revised down by 95,000, with March now estimated at just 120,000 — the weakest month of the year
SOURCE: BLOOMBERG
Wage Growth: Solid Enough to Delay the Fed
-
Average hourly earnings for all private-sector workers increased by $0.15 in May to $36.24 — a 0.4% monthly increase
-
Wages for production and non-supervisory workers rose $0.12 to $31.18
-
3-month annualized wage growth is now tracking near 4.2%, consistent with Fed estimates of what’s needed to maintain stable inflation at 2–2.5%
This wage trend, while not alarming, gives the Fed cover to wait. It reinforces the idea that labor demand is still firm enough to resist immediate easing, even as broader economic momentum cools
source: bloomberg
The Household Survey: A Very Different Picture
Where things get interesting — and concerning — is the household survey, which paints a more fragile picture of the labor market
-
Employment fell by 696,000 people in May — the largest drop since 2021
-
The labor force shrank by 625,000, pushing the participation rate down from 62.6% to 62.4%
-
The number of unemployed rose 71,000, marking the fourth consecutive monthly increase — a streak not seen since the Great Recession.
-
In short, if the people that lost employment last month had remained in the labor force vs. being counted as “Not in labor force”, the unemployment rate would have been closer to 4.6%, not 4.2%
-
The unemployment rate didn’t hold steady because the labor market was strong — it held because workers dropped out
-
Some of that decline may reflect seasonality, immigration tightening, or policy friction — but the size of the drop, and its alignment with other signs of labor deceleration, makes it difficult to ignore
This is a textbook example of "bad news hidden by denominator effects" — job losses and labor force exits held the unemployment rate steady, even as real conditions worsened
SOURCE: U.S. BUREAU OF LABOR STATISTICS
SOURCE: BLOOMBERG
Labor Slack Metrics Are Worsening
Other leading indicators of labor softening include:
-
Job leavers (voluntary separations) fell, often a sign that workers have less confidence in finding better opportunities
-
Multiple job holders rose, as workers increasingly rely on secondary income sources
-
Long-term unemployment (27+ weeks) rose to 1.5 million, now making up 21.5% of total unemployed — a two-year high
This shift toward deeper slack — even as headline figures remain stable — suggests a quiet cooling of labor market tightness that may gain speed heading into Q3
Market Reaction and Fed Expectations
-
The 2-year rose 9-10 bps after the release, moving back above 4.00%, while the 10-year stayed rangebound near 4.50%.
-
September rate cut odds fell back to ~70%, down from near 100% earlier in the week.
-
Swap rates moved higher across the front end, with 2s and 3s retracing part of their late-May dip
The Fed is likely to interpret this report as a net neutral: enough signs of moderation to maintain confidence in gradual cooling, but not enough deterioration to justify action in June or July. With tariff pass-through risks building by mid-summer, September is no longer a base case — it’s back to a coin toss.
My best guess remains one 25bp cut in December…while President Trump’s wants four times as many
SOURCE: TRUTH SOCIAL
Last Note for Borrowers and Hedgers
The May jobs report won’t break the Fed’s patience. But it does complicate the timing of cuts — and that matters for those managing floating-rate exposure
-
Swap rates are higher today, but still below their April peaks
-
The front end has become sensitive to intra-month data swings, meaning working orders and staged entries remain the best approach
-
If labor data continues to deteriorate — or inflation surprises softer in June — rate expectations will move quickly
-
Use short-lived risk-off dips to your advantage by layering into hedges below market
SOURCE: BLOOMBERG
This material should be construed as the solicitation of an account, order, and/or services and represents the opinions and viewpoints of the individual authors or presenters. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers.
The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.
References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.
StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.
StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorised and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the FCA.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.
StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licensee (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for cross-border money transfer service).
SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.
StoneX Financial (HK) Limited (CE)No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX Financial Pty Ltd (ACN 141 774 727) holds an Australian Financial Service License (AFSL: 345646) for Dealing in Securities, Exchange-Traded Derivatives Contracts, OTC Derivatives Contracts and Foreign Exchange Contracts, and is regulated by the Australian Securities and Investments Commission.
StoneX Securities Co., Ltd. (“SSJ”)(Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
© 2025 StoneX Group Inc. All Rights Reserved.
Discover more insights
