There is an old adage in the forecasting business: If you have to forecast, forecast often!

That sentiment could not be more relevant today than it is for the May U.S. employment report.

The jobs report, as it is called, whiffed massively. The U.S. economy added only 38,000 jobs last month, the fewest in almost six years. The median forecast of Wall Street economists surveyed by Bloomberg News called for an increase of 160,000 jobs.1 Equally surprising, the unemployment rate fell to 4.7% from 5.0% due to the labor participation rate being the lowest in nearly four decades.2

In my view, the numbers are so out of whack with what you see everywhere else in real time data that they cannot be real or even remotely correct.

June Rate Hike Off the Table

Be that as it may, if nothing else, I believe the May jobs report absolutely takes out a June rate hike.

That being said, as I noted in my previous blog, I still assert that the Federal Reserve (Fed) remains on its path to raise rates sometime this year despite this data point setback. They shouldn’t, but Fed policymakers have given every indication they are very inclined to do it still.

So, it is on to more data over the next few weeks. The focus now switches to early July, when the next jobs report is due, at which time we may be better able to assess if a July rate hike is still a possibility. I think it still is, although the probability has certainly gone down.

If this data is anywhere close to being a real trend, and I have my doubts about it, the winners in all of this are emerging markets rates and currencies, not equities.

For more news and commentary on current market developments, follow @KrishnaMemani.

1 “Employers Added 38,000 Jobs in May, Fewest in Almost Six Years,” Bloomberg, May 3, 2016.

2 “US Created 38,000 Jobs in May vs. 162,000 Expected,” CNBC, May 3, 2016.