The US job creation engine sped up in May, further diminishing odds on a rate cut before the November election. According to data released by the Bureau of Labor Statistics this morning, 272,000 jobs were added in the month, solidly overshooting the 175,000 consensus forecast, and remaining well above the 120,000 that is generally believed sufficient to mechanically offset net growth in the labour force. Revisions to prior months saw overall gains lowered by a total 15,000 positions.

The unemployment rate ticked higher to 4 percent, breaking a 28-month stretch below the 4 percent threshold, and wage gains accelerated, exacerbating sticky inflation fears. Average hourly earnings climbed 0.4 percent month-over-month, up from 0.2 percent, and were up 4.1 percent year-over-year.

The dollar is coming off an eight-week low in line with a curve-wide rise in Treasury yields as traders push expectations for Federal Reserve policy easing further into the future – toward December and beyond. Equity futures, commodity prices, and risk-sensitive currencies are all tumbling in relative terms.

Bottom line: This morning’s data defies expectations for a cooldown in the US economy, and suggests that the Fed will have to maintain rates at current levels for longer. The extraordinarily-wide expected growth and interest differentials that favour the US dollar look set to remain intact for now, helping maintain the greenback’s relative overvaluation.

The Canadian economy also added more jobs than expected in May – casting doubt on the likelihood of a rate cut at the Bank of Canada’s next meeting. This morning’s update from Statistics Canada shows 26,700 positions gained in the month, with the unemployment rate rising to 6.2 percent from 6.1 percent in April as the labour force expanded and job creation failed to keep pace. Consensus estimates had pointed to roughly 25,000 new hires, with elevated population growth and still-high participation rates keeping unemployment at 6.1 percent.

Average hourly wages for permanent employees – closely watched by monetary policymakers – rose 5.2 percent from a year earlier, accelerating from the prior month’s 4.8-percent print. Total hours worked were up 1.6 percent year-over-year, unchanged from the prior month.

Expectations for a rate cut at the Bank of Canada’s July meeting are falling, with policymakers seen as less likely to deliver back-to-back moves. Taken in combination with the prior month’s expansion, today’s data is consistent with a re-acceleration in labour market and economic conditions, potentially giving policymakers pause as they seek to balance growth and inflation risks in the summer months. Although the loonie’s gains will likely be swamped by broader moves in the greenback in the coming hours, a floor should begin to appear under the exchange rate.