Gold Investors are now focused on US Jobs Data Due This Friday
U.S. employers added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth.
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Nonfarm payrolls rose 75,000 in May after a downwardly revised 224,000 advance the prior month, according to a Labor Department report Friday. The increase missed all estimates in Bloomberg’s survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.
The dollar and Treasury yields fell as the data signaled the labor market — a pillar of strength for an economy headed for a record expansion — was facing new pressures even before Trump threatened tariffs on Mexican goods in addition to proposed higher levies on Chinese imports. Retail sales, factory output and home purchases have shown the economy struggling this quarter after better-than-expected growth in the first three months of the year.
“It definitely looks like we’ve downshifted in the pace of job growth,” said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. “Overall it’s a disheartening report particularly since you may have some trade effects there, but a lot of the trade tensions escalated” since the reference period for the Labor Department’s surveys in the middle of the month, he said.
Stocks jumped as traders focused on the interest-rate implications of the report. Fed funds futures showed a quarter-point cut almost fully priced in for July.
Fed policy makers have described the economy as solid, though recent remarks from Chairman Jerome Powell signaled openness to lower rates if needed. St. Louis Fed President James Bullard, who votes on policy this year, this week became the first official to indicate likely support for a rate cut; others suggested they’re waiting for more data.
As the world’s largest economy nears its longest-ever expansion in July, the employment report may amplify rhetoric that Fed rate cuts are needed to support growth.
Revisions subtracted 75,000 jobs from the prior two months, bringing the three-month average to 151,000.