Data Preview & Forecast
MUFG forecasts May 2026 nonfarm payroll (NFP) growth to be 95k, slightly above the median of 85k from Bloomberg contributors, and higher than central breakeven estimate of ~30k.
The unemployment rate (U/R) is expected to remain at 4.3% in May, consistent with the median estimate from Bloomberg contributors. Steady labor force participation of prime-age workers (25-54) is expected to largely offset any declines in participation of older workers (55 & older).
As in prior months, education & health care is expected to be the primary driver of jobs growth, followed by strong demand in transportation & warehousing, construction and retail trade.
Market Thoughts
Base-case view: A relatively solid headline NFP print, and a steady U/R could trigger a mild bear flattener. However, this outcome is largely expected/priced-in, so with a move of only ~3-5bps in the front end as markets have been holding in that range as of late.
Upside risk: If there is a major upside surprise (headline print above 125k and broad-based jobs growth) and if the U/R falls, then the 2yr could make a run to the 4.10-4.15% range, but dip buyers are likely to step in, limiting the sell-off.
Downside risk: An especially weak NFP and higher U/R would likely reduce Fed hike expectations and steepen the curve. The 2yr could break slightly below 4%.
Please see the link for the full write-up with charts and scenarios…