US payrolls surge 172K as DXY tops 100, crushing rate-cut bets

The US added 172,000 jobs in May, more than double the 85,000 consensus, while April payrolls were revised up 64,000 to 179,000, the Bureau of Labor Statistics reported Friday.

The unemployment rate held at 4.3 percent, and average hourly earnings rose 0.3 percent month-over-month, matching forecasts, with the annual rate cooling to 3.4 percent from 3.6 percent — a combination that suggests wage-driven inflation pressure remains contained even as hiring accelerates.

Healthcare led with 37,000 new positions, followed by transportation and warehousing at 30,000 and retail trade at 22,000. The information sector shed 13,000 jobs, reflecting ongoing AI-driven restructuring, while federal government employment fell by 9,000. The 172,000 headline far exceeded the 12-month average of about 102,000 and marked the third straight month of accelerating gains.

The blowout print crushed expectations for a June 16 rate cut and forced traders to recalibrate the Fed's path toward a higher-for-longer posture that could extend deep into the second half of 2026. Treasury yields surged, the dollar index broke above 100 for the first time in weeks, and gold tumbled as the possibility of near-term easing evaporated.

Dollar Breaks Above 100 as Rate-Cut Bets Collapse

The DXY surged past the 100 threshold immediately after the release, a level that had capped rallies since early May. The move reflected a wholesale repricing of Fed expectations: fed funds futures now price a 41.4 percent probability of a rate hike by January, according to LSEG data, up from negligible odds before the print. Dallas Fed President Lorie Logan had warned earlier in the week that the central bank may need to raise rates later this year if inflation pressures persist, a view that now carries more weight after the jobs data.

The dollar's strength rippled across currency markets. EUR/USD fell for a third consecutive session, with bears targeting a break below 1.16. AUD/USD dropped 0.7 percent, and USD/JPY tested the 160 level — a threshold that previously triggered intervention by the Ministry of Finance in late April.

Gold and Risk Assets Under Pressure

Gold prices slid below $4,400 as the stronger dollar and rising real yields eliminated the case for the non-yielding asset. The selloff accelerated after the DXY broke above 100, with some strategists advising selling into rallies toward $4,300.

Bitcoin fell below $60,000 for the first time since October 2024 before recovering to around $61,200, as the hawkish repricing hit rate-sensitive crypto assets. Ether dropped 10 percent to $1,596, underperforming bitcoin and pushing the ETH/BTC ratio to a year-to-date low. Wall Street indices also retreated, with the Nasdaq down 3 percent and the S&P 500 falling 1.8 percent, caught between the positive signal of economic resilience and the negative signal of removed liquidity support.

What Comes Next

The May NFP report resets the policy debate ahead of the Fed's June 16 meeting. With the labor market running hot and wage growth moderating rather than collapsing, the central bank faces a dilemma: holding rates steady risks overheating, while any dovish signal risks reigniting inflation expectations. Markets will now focus on the May CPI report due later this month for the next clue on whether the Fed can maintain its wait-and-see stance or whether the data forces a hawkish pivot.

This article is for informational purposes only and does not constitute investment advice.