Week in Review: June 6, 2025

June 9, 2025

Recap & Commentary

Markets ended the week higher boosted by the May employment report, no new significant tariff announcements, and plans for the US and China to hold trade talks this upcoming week.

Friday’s employment report showed the economy continued to add new jobs in May at a decent pace. In addition, the Job Openings (JOLTs) report surprised to the upside. The combination of the two reports pointed to labor market conditions which remain relatively healthy, helping assuage some of the concerns about a tariff-induced economic slowdown.

Following the release of the May employment report, odds of a Fed rate cut in September fell from ~95% to ~68%, reinforcing the belief that the Fed is likely to continue its cautious approach toward monetary policy until the implications of  President Trump’s trade policies become clearer. For his part, Trump chided the Fed saying it should cut rates by a full 1.0%.

Treasury yields across the curve moved higher over the course of the week as they responded to different factors. At the short end of the curve, the 2-Year yield rose 0.14% to end at 4.04%, as timing expectations for the next Fed rate cut got pushed out further. Longer-term yields also moved higher, after the Congressional Budget Office (CBO) said the current version of the House spending bill now being debated by the Senate would increase the deficit by $2.4T over the next decade. The 10-Year yield rose 0.10% to end at 4.51%, while the 30-Year yield rose 0.04% to end at 4.97%.

Economic Commentary

Employers continued to add jobs at a reasonable pace in May as nonfarm payrolls increased by 139K, better than the consensus forecast of 126K. Unemployment remained unchanged at 4.2%, leaving the measure range-bound between 4.0-4.2% for the 13th consecutive month.  Unemployment was aided by a 0.2% decline in the participation rate which saw 625K individuals quit the labor force, largely offsetting the 696K individuals who lost work according to the household survey used to calculate the unemployment rate. Had the participation rate remained unchanged, unemployment would have jumped to 4.6%. March and April payroll gains were revised down by a combined 95K. Separately, the JOLTs report showed demand for labor remained steady as job opening increased from 7.2M in March to 7.39M in April.

Economic activity as measured by Institute for Supply Management (ISM) slowed more than expected with both manufacturing and services contracting in the same month for the first time since June 2024. May also marked just the fourth monthly contraction in services since June 2020. Within manufacturing, employment and new orders continued to contract at approximately the same rate as in April. Prices too were relatively unchanged remaining significantly elevated. Within services, employment reversed from a mild contraction in April to modest growth in May. However, new orders plunged, contracting at their fastest rate since December 2022, suggesting a sharp decline in demand.

Of Note

Municipal bond issuers sold $20B of debt during the week, the largely weekly supply since 2017. Year-to-date issuance is 20% higher than a year ago as issuers move forward with various projects.

Market Indices (As of 06/06/2025)

• Consumer Inflation (CPI)
• Producer Inflation (PPI)
• Consumer Sentiment
• Small Business Optimism
• Initial Jobless Claims