US jobs surge casts doubt over interest rate cuts

Hiring in the US surged unexpectedly last month, continuing to defy predictions of a slowdown while raising fresh questions about when interest rates will fall.

Employers added 272,000 jobs in May, the US Labor Department said, above expectations of 185,000 new roles. The larger-than-expected gain emerged despite the highest borrowing costs in more than 20 years, which analysts have been expecting to weigh on the economy.

The US central bank has raised interest rates sharply since 2022 to fight inflation, which measures the pace of price rises. The Fed has cited the strength in employment as a sign that the economy can handle the current rates. The latest job figures undermine other data suggesting signs of softening and will bolster the case that talk of cutting borrowing costs is premature, analysts said.

"Today's data suggests the Fed is going to have to sit tight and wait a while longer before that first cut can be considered," said Richard Carter, head of fixed interest research at Quilter Cheviot, the investment management firm.