The S&P 500 closed at another record Tuesday, but the real action this week shifts to Friday’s May jobs report — and this one matters more than most.
Economists expect payrolls to come in at +195,000, down from April’s disappointing +175,000. The unemployment rate is forecast to tick up to 4.3%. Average hourly earnings are seen cooling to 3.8% YoY from 3.9%. None of these are bad numbers. But in a market that’s pricing in two Fed cuts by December, the margin for error is razor-thin.
Here’s the math: The CME FedWatch Tool shows a 52% probability of a September cut — down from 68% a month ago. Stronger-than-expected jobs data would push that probability lower, and yields would rise. We’ve already seen the 10-year Treasury yield drift up to 4.52% from 4.38% in mid-May. The S&P’s forward P/E of 21.5x doesn’t leave much room for a rates repricing.
“The market wants a Goldilocks jobs number — strong enough to avoid recession fears, soft enough to keep the Fed cutting,” said Diane Swonk, chief economist at KPMG US. “The problem is that range is narrowing. Below 150K and people start worrying about a hard landing. Above 250K and the Fed stays on hold.”
Also on the calendar: Wednesday brings the JOLTS job openings data, and Thursday delivers the ADP private payrolls print. Together they’ll set the tone heading into the Friday morning release. The June FOMC meeting is two weeks away, and this is the last jobs report the committee will see before their rate decision.
