June 5, 2026
Employment data from this week reinforced that the US labor market remains on solid footing, pushing US Treasury yields higher. Strong hiring, job openings, and performance in the services and manufacturing sectors reinforced the view that the US economy continues to grow despite elevated energy prices. The conflict with Iran continues to loom large as negotiations were interrupted by renewed attacks, but WTI crude oil remained below $100 per barrel this week on optimism for a diplomatic resolution.
The May employment report surprised to the upside with nonfarm payrolls up 172,000, well above the consensus estimate calling for 88,000, and upward revisions of 93,000 for the prior two months. Leisure and hospitality, local government, and health care hiring led the gains. The unemployment rate was stable at 4.3% for a third consecutive month and the underemployment rate eased to 8.1%. Average hourly earnings decelerated to 3.4% from a year ago, the slowest annual pace since 2021. Earlier in the week, April JOLTS job openings jumped to 7.6 million from 6.9 million, mainly from job postings in the professional and business services sector. Meanwhile, the Institute for Supply Management (ISM) services and manufacturing indexes both expanded to 54.5 and 54.0, respectively, on new order activity.
The firmer data pushed Treasury rates higher, with the federal fund futures market now pricing in a possible rate hike in 2026, although Chandler does not view this as a likely scenario. The 2-year yield rose 18 basis points on the week to 4.16% and the 10-year rose approximately 10 basis points to 4.54% for a modest flattening of the yield curve as of this writing. The S&P 500 eased approximately 2.6%, slipping from the record high set the prior week. West Texas Intermediate (WTI) crude oil rose to approximately $90 per barrel from $87 a week earlier, though it declined late in the week as peace talk optimism resurfaced.
The Federal Open Market Committee (FOMC) meeting on June 17 will consider the recent strong labor market data along with concerns over elevated inflation. New Federal Reserve Chair Kevin Warsh’s inaugural press conference will be closely watched for policy signals. Chandler expects the FOMC to hold the federal funds target rate at 3.50% to 3.75% at that meeting and through our six-month forecast horizon, with possible dissents from Committee members. We anticipate the yield curve steepening gradually and continue to position portfolios with an emphasis on safety, liquidity, and disciplined credit risk management.
Next Week: NY Fed 1-Year Inflation Expectations, Existing Home Sales, Consumer Price Index (CPI), Producer Price Index (PPI), University of Michigan Sentiment Index
Written by Genny Lynkiewicz, CFA, Senior Porfolio Manager