The U.S. labor market surprised Wall Street. The Bureau of Labor Statistics reported 172,000 new jobs in May - roughly double the 80,000 to 88,000 economists had forecast.
The Federal Reserve held its benchmark interest rate steady at 3.5%-3.75%. This jobs report makes clear why the central bank isn't rushing to cut.
The hiring was concentrated in leisure and hospitality, local government, and healthcare. The unemployment rate held flat at 4.3%. Revisions to March and April data also showed a stronger picture than initially reported.
The stronger-than-expected data has shifted market expectations. Traders are now pricing in a higher probability of a rate hike later this year, rather than a cut. Persistent inflation concerns, driven by rising energy costs and geopolitical tensions, have kept the Fed cautious.
A stronger dollar typically follows expectations of higher rates, reducing appetite for volatile assets like crypto. Sustained labor strength keeps consumer spending elevated, feedback into inflation, and extends restrictive policy. Any portfolio with significant crypto exposure should account for this macro environment potentially persisting into 2027.