Robust employment numbers should support equity market strength
The job market is crushing it these days.
In May, the U.S. economy added 172,000 new jobs, and newly updated numbers revealed stronger job growth in the two previous months than initially estimated. March’s job gains were revised up by 29,000 to 214,000 (the largest monthly gain since December 2024), and April’s were revised up by 64,000 to 179,000.
That brings average net new job creation over the past six months to 92,000, which is the highest level since February 2025 (see the chart), shortly before Trump’s tariffs.
Nonfarm Payrolls Growth (January 2024 – May 2026)
Bloomberg, calculations by Horizon, data as of 06/08/2026.
These impressive gains leave us with some key takeaways:
- The labor market is back on track: The deteriorating conditions in the job market back in late 2025 and earlier this year have turned around, greatly easing fears that a weak economy would hurt consumer spending and economic growth.
- All eyes are on inflation: With little need to shore up the labor market and spark growth, expect the Federal Reserve to focus squarely on inflation. Indeed, Fed Governor Waller recently noted the growing risk of sustained inflation if the conflict in the Middle East continues.
- Rate cuts are off the table. . . for now: Rising inflation risks, coupled with a strengthening economy, mean the Fed is unlikely to cut interest rates in the near term. In fact, a growing number of investors are predicting at least one Fed rate hike this year, particularly if energy inflation broadens out and impacts more areas of the economy.
Although markets could experience some short-term volatility as investors adjust to the possibility of higher inflation and interest rates, we believe today’s strong labor market provides important support for continued economic activity and corporate earnings growth. This strength could also help fuel a broad-based equity market rally across multiple sectors, in contrast to the narrow, AI-centric price action seen over the past few months.
Authored by Zachary Hill
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