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The US economy added just 75,000 jobs in May, a sharp drop-off from a month earlier, in the latest sign the Federal Reserve may need to cut rates in order to sustain a decade-long expansion.
Non-farm payrolls dropped from April’s 224,000, which was also revised downward from the 263,000 initially reported, the Department of Labor reported on Friday. The May hirings were lower than the median 185,000 predicted by economists.
Despite the disappointing data, the unemployment rate held steady at 3.6 per cent, matching its lowest level since 1969.
The jobs market has been a bright spot for the US economy, meaning Friday’s figures are likely to add to the mounting concerns around the country’s growth outlook.
The non-farm payrolls follow unexpectedly weak private sector jobs data for May published earlier in the week, which prompted markets to ramp up bets the Fed may have to deliver three quarter-point interest rate cuts to support the economy already on edge over an escalating trade war with China and other major economies.
The weak hiring was accompanied by signs wages were also rising more slowly; economists had predicted a 3.2 per cent rise over a year ago — which would have matched April — but instead average earnings in May were up just 3.1 per cent.
The yield on the policy-sensitive two-year Treasury tumbled 9.8 basis points to 1.7848 per cent, having sat lower at 1.87 per cent just before the release of the data, and taking it back towards a 17-month low struck earlier this week after Fed chairman Jay Powell said he would “act as appropriate to sustain the expansion”.
The 10-year Treasury yield dropped 5.8bp to 2.0637 per cent.
Market expectations for three or four quarter-point Federal Reserve rate cuts this year lurched higher to 60 per cent on Friday, from 49 per cent the previous day, according to Bloomberg data on federal funds futures.
The move suggests futures traders have sharpened bets for numerous reductions to the central bank’s benchmark rate over the next six months.