Federal Reserve policymakers have already signaled they are in no rush to cut interest rates, and a government report on Friday showing the labor market is far from crumbling amid big trade policy changes only cements that stance.
U.S. President Donald Trump ratcheted up his calls for rate cuts.
"Go for a full point, Rocket Fuel," Trump said in a post on Truth Social that urged the Fed to lower rates by 100 basis points. The president added that the Fed could simply increase rates again if inflation reignited.
But the latest job growth reading is already giving Fed policymakers more comfort about holding the U.S. central bank's policy rate steady as they watch to see how higher import tariffs affect the economy.
It “was a solid report and I was pleased with it,” Philadelphia Fed President Patrick Harker told CNBC, adding that now was the time for the Fed to hold policy steady.
Fed officials have telegraphed that they intend to do just that at their June 17-18 policy meeting.
Financial markets have been betting the Fed will wait until September to cut rates and will deliver a second reduction in borrowing costs by December; after the jobs report they trimmed their bets on a possible third rate cut by the end of this year.
"Continued strength in the jobs number provides further support for the Fed's patience," said Scott Helfstein, Global X's head of investment strategy. "The Fed is likely to remain on hold through the end of summer to see how tariff negotiations proceed and ensure prices are stabilizing."
Analysts said they expect more softening ahead in the labor market as higher import levies and government policy uncertainty strain economic growth. Job gains in May were concentrated in a narrowing range of industries, including healthcare, and manufacturing lost jobs in its worst showing since January, the employment report showed.
The workforce shrank by the most in 17 months.
Fed policymakers, however, have signaled they are disinclined to act preemptively to cushion any emerging weakness in jobs, especially with higher tariffs seen likely to also push up prices and potentially reignite inflationary pressures.
The takeaway on the labor market for the Fed, said Krishna Guha, vice chairman of Evercore ISI, is that, "given the lack of any serious cracks to date, the risk of waiting several more months to learn more with policy in a modestly restrictive posture looks low."
