Data Flash – US May Jobs Report:: Broadening Gains, White-Collar Weakness, and a Leisure Distortion
The desk interprets the latest US employment report as indicative of persistent strength in the labor market, despite some notable weaknesses in specific sectors. Per the full note from RBC Economics, the May payrolls increased by +172K, with a significant upward revision of April's figures. The desk believes that while cyclical sectors saw job gains, underlying weaknesses in white-collar hiring could signal future labor market challenges. Given the current labor dynamics, the continued inflation pressures may compel the Fed to maintain a hawkish stance despite the impending slowdowns from World Cup-related boosts and tariff impacts.
What the desk is arguing
The labor market remains resilient, underscored by a healthier employment gain than anticipated. Per RBC's analysis, the May job figures revealed strong activity in leisure and hospitality along with healthcare, although the white-collar sector's decline offers a cautionary note.
Moreover, the revision of April’s jobs figure to +179K—up from +115K—emphasizes the underlying strength, although it is essential to remain vigilant about potential weaknesses as macroeconomic factors evolve. The addition of over 100K jobs outside of leisure and hospitality underscores this resilience in a low employment breakeven context.
Where it sits in our coverage
Our consensus target for the USD is 1.075, with a range of 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk’s current outlook aligns closely to the views held by jpmorgan, sitting within the upper tier of the consensus range. Contrarily, bofa expresses a more cautious outlook, positioning the dollar lower than current trends suggest.
How other firms see it
Firms such as jpmorgan and citi share a similar outlook on the dollar's resilience, viewing current employment strength as a bullish signal. In contrast, bofa provides a more bearish perspective, reflecting concerns about white-collar job losses.
Watch for developments in USD/JPY as it may provide insights into market sentiment regarding the Fed's ongoing policies, especially with this latest jobs report entering the discourse.
What the calendar says
With no high-impact events on the horizon, market participants should remain focused on how upcoming inflation data and Fed communications will shape investor sentiment amid the evolving labor landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01US jobs report indicates strong labor market resilience with +172K payrolls in May.
- 02Significant gains in leisure and hospitality countered by weaknesses in white-collar sectors.
- 03Continued job growth suggests potential Fed hawkishness despite headwinds.
- 04Impending slowdowns from events like the World Cup could impact near-term forecasts.
Market implications
Traders should monitor the USD's performance closely, particularly as we assess the impact of the stronger-than-expected job numbers on the Fed's policy trajectory. A significant level to watch is 1.075 for potential breaks that could influence currency strategies moving forward.
Risks to this view
Should the projected momentum falter due to significant job losses in trade-exposed sectors or lower-than-expected inflation data, it could prompt a reassessment of the bullish stance on the USD. Additionally, geopolitical tensions leading to trade disruptions may also pose risks.
RBC Royal Bank View Online US Jobs Report: Broadening Gains, White-Collar Weakness, and a Leisure Distortion Bottom Line: We’ve said many times that it’s hard to bet against the US economy and the May employment report confirms the labor market is strong, despite headwinds. The May payroll report came in with a sizeable upside at +172K, and a major revision to April data (to +179K from +115K). The bulk of job gains in May were concentrated in leisure and hospitality, health care, and local government hiring.
The unemployment rate held steady at 4.3%. While there appears to be some broadening of job gains and cyclical momentum, leisure and hospitality likely saw a temporary boost from the upcoming World Cup. Still, excluding leisure and hospitality, the US labor market added just over 100K jobs which is exceptionally strong in the context of a low breakeven employment rate .
Still, underlying trends persisted this month - AI investment continued to support nonresidential construction and durable goods manufacturing through the buildout of data centers. And the weakness was concentrated in white collar hiring: the insurance sector has shed jobs -45k jobs so far this year and the information sector remains in a multi-year hiring glut. Labor traditionally has been viewed as a lagging indicator, but there are lots of clues about the economy in these numbers.
Looking ahead, we do expect some of the momentum to slow: the World Cup ends in July and the AI buildout is slowing. And a new wave of tariff announcements likely means trade exposed sectors will start to shed jobs again, similar to the trend seen at the end of 2025. Nonetheless, we expect structural support will hold the unemployment rate steady for the remainder of this year and shift the Fed’s focus to the persistent inflationary pressures.
Here are the three themes that stood out in this morning’s labor market report: 1) Cyclically exposed sectors added back jobs after contracting in 2025 – but it’s too soon to say whether this will become a broader trend - Throughout 2025, strong payroll prints came with a caveat: nearly all gains were concentrated in health care. This has not been the case in 2026. - Cyclical goods (+99K) and cyclical services (+170K) have together added +269K jobs this year. Still, this only recoups about a two-thirds of what these sectors shed in 2025, but it's a welcome shift. - In May, cyclical services hiring was entirely driven by leisure and hospitality (+70K).
Outside of this, professional and business services employment registered positive while some white-collar sectors (notably insurance and information) declined. - Within leisure and hospitality, food services and drinking places accounted for the majority (80%) of hiring in May. This could be a story of one-off hiring ahead of major World Cup events in the US. - In April, revised data shows gains were more broad-based, with transportation and warehousing adding back jobs alongside retail. But these gains may be transitory, as the overturn of IEEPA boosts activity in the short term, but looming tariff announcements could reverse that trend. 2) Rising input costs do pose layoff risks, but so far, the risks are contained - We wrote before that the energy shock isn’t likely to trigger a US recession in 2026 .
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