Good morning, investors. This week brings fresh inflation data, corporate earnings and, to make a prediction, likely further developments in the Trump-Elon social media spat. Today we’re unpacking the Rorschach test that was the latest jobs report.

Raising the stakes on rate cuts

The labor market isn’t collapsing, but it’s bleeding at the edges just enough that the Federal Reserve should pay more attention than it did a month ago.

The May jobs report looked promising at first glance, and the stock market took it as a greenlight to run higher on Friday.

The US added 139,000 non-farm payrolls last month, beating consensus expectations for 125,000. Unemployment held steady at 4.2%.

Yet those top-line numbers mask a mounting weakness. 

The figures for April and March, for instance, were revised down by a combined 95,000.

Morgan Stanley strategists noted that only nine industries posted job gains in May, while Federal payrolls declined 22,000 and the private sector “showed poor diffusion of gains.” 

Meanwhile, the household survey reiterated that softening. While the headline jobless rate did not change from the prior month, it did in fact rise from 4.187% to 4.244%. 

That marginal shift included a 198,000 loss among prime working-age individuals, and a drop of 623,000 full-time jobs. 

“On a population- and payroll-concept adjusted basis,” David Rosenberg of Rosenberg Research said,” unemployment plunged by -791k. That gap, my friends, is basically a 1-in-50 event.”

To be clear, none of this did anything to move the Fed’s policy trajectory. The central bank and markets both anticipate just two rate cuts in 2025.

That’s partly due to one bright spot in the May report — the stronger-than-expected 0.4% rise in average hourly wages.

The Fed remains focused on inflation, and sticky wage growth bolsters its case to keep rates on hold.

But the data is nowhere near bulletproof. The quit rate — one proxy for wage pressure — has fallen for four consecutive months to a four-year low, according to Rosenberg. 

“Greater worker anxiety and reduced confidence is translating into higher wage growth in a report replete with inconsistencies,” he said. 

In sum, the underlying data are pointing in the wrong direction:

• Labor force participation fell to 62.4% from 62.6%

• Employment-to-population ratio dropped to 59.7%, the lowest since January 2022

• Prime-age employment dropped by 198,000 in May

• Full-time jobs fell by 623,000, accounting for most of the decline in the household survey

• Payroll revisions erased 95,000 jobs from the last two months

It’s not time to panic, but it would be disingenuous for the Fed to insist that the labor market remains as robust as it did even a month or two ago.

The latest numbers only raise the stakes for a Fed banking on patience. 

Market snapshot

Elsewhere

📊 The US added more jobs than expected in May. Employers added 139,000 jobs in the month, though revisions to March and April reveal a less robust market than previously thought. The unemployment rate held steady at 4.2%. (WSJ)

⭕️ Circle’s IPO marks a turning point for stablecoins. Crypto is once again a hot topic on Wall Street, as the debut of Circle Internet Group highlights. The stock surged some 170% on its debut Thursday, and tacked on another 30% Friday. (Barron’s)

📉 Elon Musk and Trump’s public feud hit Tesla stock. The two figures duked it out across public comments last week, wiping out $150 billion in market value from Tesla in the process. The stock rebounded Friday following Thursday’s 14% decline, which was its third-worst session of the last decade. (Opening Bell Daily)

Tech bull Dan Ives’ highest-conviction stock pick

The Wedbush strategist just launched an ETF with 30 stocks he expects to compound for years to come. He told our Best Ideas Club members which of those 30 names he believes will perform best in the next 12 months.

🔓️ Unlock Ives’ top pick and get a new stock every Sunday.

Rapid-fire

• Apple’s Worldwide Developer Conference kicks off today with investors looking for new AI products (Yahoo Finance)

• The National Guard deployed to Los Angeles to respond to immigration protests and riots (AP)

• President Trump doesn’t seem focused on a potential reconciliation with Musk (Axios)

• Wells Fargo is now focusing on the future after years of sweating its own past (Yahoo Finance)

• Meta is in talks to make a multi-billion investment into the startup Scale AI (Bloomberg)

• Rising summer temperatures and expensive natural gas prices will push electric bills higher in the coming months (WSJ)

• The US housing market now has 500,000 more home sellers than buyers (ResiClub)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].