US employers in May added the fewest workers in six years, while the unemployment rate fell to an eight-year low.

The Labour Department’s report Friday showed that nonfarm payrolls grew by 38,000 in May, much less than expected, while the unemployment rate fell to 4.7%.

Economists had forecast that nonfarm payrolls grew by 160,000, which would have matched April’s pace, and that the unemployment rate slipped to 4.9% from 5%, according to Bloomberg.

The pace of month-on-month job gains has slowed since October. The nonfarm payroll print for March was revised to 123,000 from 160,000.

While this suggests that employers are scaling back hiring, it’s worth considering that the low unemployment rate means that fewer workers are willing and able to work.

The roughly 35,000 Verizon workers who were on strike during the reference week of the jobs report were expected to drag the headline, though there was no consensus on the extent of the dent. Information jobs fell 34,000.

Average hourly earnings rose 0.2% month-on-month and 2.5% year-on-year, just as forecast. Wage growth in April was revised higher.

The labour-force participation rate inched down to 62.6%, though it’s still up from the 38-year low of 62.4% touched in September.

With the Federal Reserve considering an interest-rate hike this summer, the jobs report was being watched for progress on the full-employment leg of its mandate. Fed fund futures, which reflect traders’ expectations on future interest rates, plunged after the jobs report.

“And thus died the June rate hike,” Pantheon Macroeconomics’ Ian Shepherdson wrote in a note. BNP Paribas economists said the data supported their view for the Fed to keep rates on hold until at least 2018.

The dilemma for the Fed, Shepherdson said, is that the low unemployment rate unambiguously calls for tighter policy. But if Fed members believe the slowdown in jobs creation will persist, they will expect the unemployment rate to rise again even with interest rates unchanged.

The response to the jobs report across markets was decisive. As expectations for higher rates fell, the dollar tanked, too. Treasurys sold off, sending their yields higher. Gold spiked and futures fell.

Via Bloomberg, here’s what Wall Street was expecting:

  • Nonfarm payrolls:+160,000
  • Unemployment rate: 4.9%
  • Average hourly earnings month-on-month: +0.2%
  • Average hourly earnings year-on-year: +2.5%
  • Average weekly hours worked: 34.5

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