Jobs Report Is No Friend to the Dollar or the Fed

John Maynard Keynes is often credited with having said “When the facts change, I change my mind.” In that spirit, the U.S. employment report for May should seriously challenge the notion that the Federal Reserve interest-rate increase on June 14 is a fait accompli. For policy makers, the decelerating pace of job growth is a fact they can’t ignore. Traders are already pushing the dollar lower and gold higher -- something that wouldn’t be happening if higher rates were assured.

Despite the drop in the unemployment rate to 4.3 percent -- the lowest level since May 2001 -- Friday’s jobs report adds a wrinkle of risk. The issue is the pace of non-farm payroll job gains, which is the actual number of jobs being created. Although the three-month moving average of 121,000 net new jobs is positive, the pace has slowed dramatically. If the Fed keeps raising rates, it will slow further.