MNI US Macro Weekly: Hike Odds Surge On Booming Jobs, CPI Next

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Executive Summary

• The week was ultimately dominated by a return of data having a significant sway on markets after months of acute sensitivity to geopolitical headlines.
• Friday’s NFP report saw a significant hawkish shift in Fed pricing, sparking large risk-off moves. A hike is now priced for December with a cumulative 46bp of hikes by mid-2027 vs 29bp before the release.
• The strength was concentrated in the establishment survey, as payrolls growth was far stronger than expected along with large upward revisions, whilst the household survey saw the unemployment rate hold at 4.3% for levels close to full employment.
• Elsewhere, Q2 GDP tracking still looks solid, with the Atlanta Fed’s GDPNow running at 3.0% and the Dallas Fed weekly economic index eyeing 4+%.
• Both ISM manufacturing and service surveys also beat expectations for May. The manufacturing report was strong in all meaningful details and came with an additional welcome surprise of a pullback (albeit modest) in price pressures. The services report was also largely solid in the activity details, continuing to portray robust expansion in the sector with the caveat of soft employment and still-elevated inflation.
• The May Beige Book portrayed an economy that is experiencing stronger growth, steady labor markets on balance and mounting price pressures compared with the April edition.
• Fedspeak more broadly has held its recent hawkish gravitation: doves see policy in a good place whilst hawks are open to hikes but not yet. Sole post-NFP Fedspeak has come from Hammack (’26 voter, hawk) who largely repeated rhetoric along the lines that it may “soon” be “appropriate to act” in tightening policy.
• The FOMC media blackout begins this weekend.
• Next week sees data attention on the May CPI report on Wednesday before PPI on Thursday.