Jobs Report: What the May report means for the June Fed meeting

The U.S. added 339,000 jobs in May, much more than the 195,000 economists were expecting. How will this report impact the Fed's June rate decision? Yahoo Finance's Jennifer Schonberger breaks down the report.

Video Transcript

BRAD SMITH: So the May jobs reports came in hotter than expected. Let's get reaction from Yahoo Finance's Jennifer Schonberger. Jennifer.

JENNIFER SCHONBERGER: Good morning, Brad. 10 consecutive rate hikes not enough to knock down the job market yet that number, as you've mentioned, continuing to surprise to the upside blowing out. And that though not enough to convince investors that the Fed is going to pull the trigger and hike rates again at the June meeting in less than two weeks time. Take a look at the Fed funds futures this morning. They have been bobbing around wildly.

We saw as low as a 60 40% chance of a pause as high as better than 70%, now it's bobbing around 65% chance that we will see a pause. Coming into this number, Fed officials have been very divided about what to do. Of course, they're going to be looking closely at this number. Though, this week, we heard from two key officials, Fed Governor Philip Jefferson, as well as Patrick Harker at the Philadelphia Fed, who both hinted that the Fed should pause or skip the next meeting before perhaps raising rates again later this year to take a step back and assess.

Chair Powell, for himself, as well as New York Fed's Williams have both said have-- or have hinted that they're both open to either option, but we do have four voting members who have strongly signaled in the past couple of weeks that a rate hike would be necessary given the stronger than expected data, the inflation has been stubborn. Those members, including Fed Governor Bowman, Lorie Logan of the Dallas Fed, Neel Kashkari from Minneapolis, and Fed Governor Waller.

Of course, many Fed officials believe that a strong job market is feeding inflation higher. We're going to get another read on inflation on the first day of the Fed's meeting when we get that CPI number out on June 13. So that is going to be the definitive deciding factor on whether the Fed will pause or continue raising in June. We have not heard yet from President Biden on this report, but I will get a White House reaction when I speak with Heather Boushey, a member of the President's Economic Council at about 10:15 this morning. Back to you.

- Looking forward to that always. Always interesting to hear from, Heather. Thanks so much, Jennifer Schonberger.