Below are the economic and market highlights for the week:
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May nonfarm payrolls came in better than expected, easing concerns of an imminent slowdown amid uncertainty from the Trump administration’s tariffs. U.S. payrolls rose 139K, topping estimates of 125K. The unemployment rate remained at 4.20%. Nearly half the jobs growth came from healthcare, which added 62K new hires. Leisure and hospitality grew 48K, signaling businesses remain confident consumers will be heading for summer vacation despite the cloudy outlook. Wage growth also appears to be bolstering consumer spending confidence. Worker pay grew more than expected during the month as average hourly earnings rose 0.40% month-to-month and were up 3.90% from a year ago. On the whole, the jobs market seems to be holding steady despite some tumultuousness on the economic front.
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The services industry finally succumbed to Trump’s trade tariffs, swinging from expansion into contraction. Businesses cited tariffs as major roadblocks to planning and purchasing decisions in May, driving the ISM Services index down to 49.9 from 51.6 in April. Numbers below 50 indicate contraction while those above signal expansion. May’s reading marked the first decline since June 2024. Business activity stalled at 50 while new orders dropped sharply to 46.4 and inventories slipped to 49.7, all indicating weakening demand. In an unwelcome sign for consumers, the prices gauge rose 3.6 points to 68.7, its highest reading since November 2022.
- U.S. manufacturing continued to cool in May amid an uncertain tariff outlook. The ISM Manufacturing Index slipped to 48.5 in May from 48.70 in April. May’s reading marks the third straight monthly decline. New orders, production, and employment all remained in contraction territory while supplier deliveries slowed due to logistical issues, which is a negative signal, rather than from demand backlog, which is typically a positive indicator. Imports and exports also took a beating, slipping to a 16-year and five-year low, respectively. A manufacturing industry executive summed it up best, saying “The administration’s tariffs alone have created supply chain disruptions rivaling that of Covid-19.”
Stocks Higher on Better than Expected Jobs Report
June trading kicked off on a strong note as Wall Street cheered a better-than-expected jobs report, pushing the S&P 500 above the 6,000 level on Friday for the first time since late February. For the week, the S&P 500 posted a 1.50% gain. The Nasdaq Composite Index and Dow Jones Industrial Average also rose, climbing 2.18% and 1.17%, respectively.
Friday’s rally followed strong tech stock gains earlier in the week. Tech and AI darling Nvidia surged to reclaim its crown as the largest stock by market capitalization on Tuesday, as investors continued to cheer its recent blowout earnings report. However, it was the May jobs report that had Wall Street buzzing, thanks to its unexpected beat. While the print was technically a win, it was a modest one—a mere 14K over expectations. It also came in lower than April’s downwardly revised 147K. We’re more likely than not to see a similar downward revision in next month’s payrolls report. Furthermore, there were also notable disparities between the establishment survey, which produces the headline payrolls figure, and the household survey, which informs the unemployment rate. The household survey, which is typically more volatile, showed a decline of 696K workers.
Surprisingly, this week’s manufacturing and services surveys failed to make a larger impression on the Street. Executives didn’t mince words in May’s reports, citing tariffs as the primary cause of the slowdown—and signaling that conditions won’t improve until there’s clarity on what tariff levels the Trump administration ultimately settles upon. The surveys also confirmed that inflation remains a persistent obstacle, with prices continuing to climb. As wages trend higher, companies are increasingly likely to pass on their rising costs to consumers.
Part of this week’s rally can also be attributed to optimism that progress really is being made on the trade front. Trump and Xi held direct trade discussions on Thursday, a conversation the White House characterized as “constructive.” The discussion helped restore a trade truce between the world’s two largest economies—a détente that had appeared to be unraveling as recently as last Friday.
While Trump and Xi were mending fences, Trump and Musk publicly divorced across airwaves and social media, in a back-and-forth more befitting C-list reality TV celebrities. Instead, it was the leader of the Free World and the world’s wealthiest individual torching their alliance on Thursday, amid long-simmering disagreements over legislative priorities and the Big Beautiful Bill. Friday’s equity gains were in no small part buoyed by the belief that this new conflict opens an additional front for the Administration—one that may distract it from its broader agenda. Many now expect Trump to dismantle DOGE in retaliation, allowing a weakened but entrenched bureaucracy to survive for no other reason than personal grievance and political theater.
The Week Ahead
Key reports include the Consumer Price Index, Producer Price Index, and Consumer Sentiment.
A Pointed Tradition
In May 2017, a severe storm swept through the Lakes region of Minneapolis blowing over numerous massive trees. One lost tree was a 180-year-old bur oak on the residential property of John and Amy Higgins. Losing the tree was deeply emotional for John, who described it as losing a friend. One that was roughly as old as Minnesota itself.
Rather than remove what was left of the tree with its missing canopy, the Higgins family decided to transform it into a unique piece of outdoor art. They commissioned chainsaw artist Curtis Ingvoldstad to carve the remaining trunk into a 20-foot-tall No. 2 pencil, complete with a sharpened tip and pink eraser. The famous pencil is known as the Lake of the Isles or LOTI Pencil.
Every year on the first Saturday in June, the Minneapolis community comes together to watch the pencil be ceremoniously sharpened. As the pencil is a “living” installation, it is sharpened annually using a custom-built, 4-foot-tall wooden pencil sharpener designed by Ingvoldstad. Tomorrow is sharpening day, and during the annual event, Ingvoldstad and a friend hoist the sharpener onto the tip of the giant pencil, carefully shaving off about a foot of wood to maintain its pointed shape and mimicking the act of sharpening a real pencil. Once the sharpening is complete, they throw the shavings to the crowd below, turning the process into a fun, interactive spectacle.
This year’s pencil sharpening falls on Minneapolis native Prince’s birthday. “Because of leap year, by coincidence, it’s going to be another 12 years before Prince’s birthday is on a Saturday,” Higgins said. “Maybe one of the pencil crew dances [five people dressed in pencil costumes dance] will be to a Prince song. We’ve got special commemorative purple Prince pencils. We typically hand out yellow pencils.”
The opening ceremony for this year’s event will feature an alphorn duo: two musicians playing 12- to 15-foot-long horns, usually used to call sheep, but also to create music in the Swiss Alps. A live DJ will also provide music for the event, including some Prince tracks. Ice cream will be served, and 60 lucky attendees will receive a special commemorative purple T-shirt launched from a giant slingshot.
Attendees can ask the pencil questions using a special telephone. Apparently, the LOTI Pencil is a sentient pencil. Higgins has said, “the pencil has a personality, and likes to do stuff regular people do — enjoy sunsets, pose for pictures with people.” The LOTI Pencil has its own Instagram account where it delivers posts in the first person.
Higgins has spoken about how the LOTI Pencil changes and evolves over time, much like a real pencil does when used. The annual sharpening symbolizes the passage of time and the idea that a pencil must be sharpened to fulfill its purpose. “When you sharpen it, it’s a promise to write a love letter, to write a formula, to write a story,” Higgins said.