Hot jobs report suggests US rates could stay higher for longer

Today’s top stories

• Brussels said Ukraine was ready for EU membership talks. However, Hungary, which is set to take over the bloc’s rotating presidency, could throw a spanner in the works.

• An ex-employee alleged that Amazon breached UK sanctions by providing Moscow with facial recognition technology after Russia’s full-scale invasion of Ukraine.

• UK Prime Minister Rishi Sunak issued a humiliating apology after he was accused of a “dereliction of duty” for leaving D-Day commemorations early to record an interview attacking Labour’s alleged tax plans.

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Good evening.

A strong set of US jobs numbers has once more highlighted the dilemma facing the Federal Reserve as it decides when to start lowering interest rates.

Some 272,000 jobs were added in May compared with a forecast of 180,000. The unemployment rate, however, rose from 3.9 per cent to 4 per cent.

Treasury bond yields rose and stocks dropped on the news as traders scaled back expectations of how many rate cuts might come this year. They are now working on the assumption that the first reduction will not arrive until December.

Today’s data comes as a surprise after other indicators, such as job openings and unemployment claims, had indicated the market might be cooling.

There is now a clear difference in policy with Europe, where the European Central Bank yesterday cut rates from 4 per cent to 3.75 per cent, the first reduction in almost five years.

Caution was still the watchword, however, a point echoed today by Bundesbank chief Joachim Nagel and other policymakers. The FT editorial board agreed, arguing the move should be seen as a “calibrated step to weaken the vice on the Eurozone economy, and not the beginning of a quick-fire easing cycle”.

Back in the US, a strong jobs market should come as welcome news to President Joe Biden amid his bid to get re-elected in November, although a rate cut before the poll would also come in handy. A big problem for Biden, however, is that the economic upturn is not being felt equally across the country, with a notable discrepancy between rich and poor areas. 

Rising prices, meanwhile, continue to be a concern for many Americans, as US Treasury secretary Janet Yellen admitted to the FT last week. Today’s report is likely to fuel expectations that inflation could prove stickier than had been expected.

Some economists blame the strength of the labour market, a point buttressed by another indicator in the latest release: average hourly pay was up 4.1 cent — significantly above what central bankers see as consistent with their 2 per cent inflation goal.

Need to know: UK and Europe economy

Former BP boss Lord John Browne called for an end to new drilling licences in the UK’s North Sea, backing a plank of the opposition Labour party’s election programme. Here’s an explainer on how Labour plans to set up state-controlled GB Energy.

Another one of Labour’s policies for the July 4 poll is overcoming obstacles to housebuilding: read what construction companies think and how Labour plans to get more people on the housing ladder.

Procurement specialists highlighted the huge fees garnered by private providers of UK public sector contracts. English local authorities, meanwhile, face a £6.2bn funding gap over the next two years.

Here’s what to watch out for in the European elections ahead of results on Sunday night. Columnist Martin Sandbu explains how the rise of the right could affect EU economic policy.

One of those right-wing forces is AUR, which has morphed from an anti-vaccination pressure group into Romania’s main opposition party, drawing inspiration from Vlad the Impaler — as well as Donald Trump.

Election special: Europe Express, the FT’s premium newsletter on European policy and politics, is free for standard subscribers today and on Monday.

Need to know: Global economy

China’s exports grew faster than expected in May, even though policymakers’ focus on manufacturing has contributed to rising trade tensions with the west.

More than one in four children face severe hunger, a problem exacerbated by conflict and climate shocks, according to Unicef, the UN’s child development agency. More than a third of the 181mn affected children live in south Asia, with countries such as Afghanistan and India particularly badly hit.

Need to know: business

Former Autonomy chief Mike Lynch was acquitted of criminal charges in a US court, ending a 12-year legal saga. Lynch, once one of the UK’s leading tech entrepreneurs, was accused of falsely inflating revenues at the software company ahead of its $11bn sale to Hewlett-Packard in 2011.

Saudi Arabia sold $11.2bn of shares in Saudi Aramco at a price near the low end of expectations, suggesting investors remain cautious about the prospects of the world’s largest oil company.

Top US antitrust enforcer Jonathan Kanter told the FT of his concerns over Big Tech’s control of artificial intelligence. Chipmaker Nvidia overtook Apple to become the world’s second-most valuable company worth more than $3tn at the market close yesterday.

The chip sector may have hailed the arrival of AI PCs as the “most exciting moment” since the birth of WiFi, but Silicon Valley is in uproar over a Californian safety bill that proposes new restrictions including a “kill switch” to turn off tech companies’ powerful AI models.

Sotheby’s and Christie’s are cutting jobs as a weaker art market brings down the value of auction sales.

Start-up tech company Aaqua was meant to become a European social media unicorn but a huge legal battle has laid bare the risks of investing in a sector known for its high failure rates. A Big Read explains.

Everton’s lenders are battling to take control of the Premier League football club. In sharp contrast, local rivals Liverpool have become a big asset in John Henry’s hugely successful transatlantic sports empire.

Science round-up

UN secretary-general António Guterres said the world needed “an exit ramp off the highway to climate hell”, as new data showed record global temperatures in 12 consecutive months. The El Niño Pacific Ocean warming effect that has contributed to the rise is expected to swing to its opposite La Niña cooling phase from late summer, which could fuel extreme weather.

SpaceX’s Starship rocket successfully completed its fourth test mission, reaching space and returning to Earth in a controlled re-entry, boosting Elon Musk’s plans to build a spacecraft able to take humans to the Moon and beyond.

A US panel of experts rejected the use of MDMA — aka party drug ecstasy — as a treatment for post-traumatic stress disorder. The ruling is a big setback for Lykos Therapeutics, the biotech developing the treatment, and the nascent psychedelics sector.

A cancer drug has been identified as a possible treatment for inflammatory bowel disease in the latest boost to expanding efforts to target illnesses with existing medicines.

The revelation that an unremarkable-looking fern has the biggest genome ever discovered illustrates the mystery surrounding the code of life, writes commentator Anjana Ahuja.

Computerised brain implants are helping disabled people walk and could provide the link between human and artificial intelligence. Read our deep dive on their transformative potential.

Some good news

Tetanus killed more than 250,000 people a year in the early 1990s. By 2019, that had fallen to fewer than 35,000, thanks mainly to the hugely successful vaccination of children.