The US economy generated just 75,000 jobs in May, providing the most convincing sign yet that growth is starting to run out of steam. The figure sharply reduces the chances of another rise in US interest rates this month.
It paves the way for the most unpredictable Federal Reserve meeting in more than two years, with markets evenly split on the chances of another increase this month.
The payrolls figure was some 100,000 less than expected, according to figures released yesterday by the US Labor Department, and marked the slowest jobs growth in the US economy in seven months.
The Labor Department also downwardly revised April payroll numbers by 12,000.
The dollar fell by more than a cent to $1.2922 against the euro in reaction to the new, a drop of 1.6 per cent on the week. It dropped 0.8 per cent against the yen to Y111.47, a weekly slide of 1 per cent, and 0.9 per cent versus sterling to $1.8844, a dip of 1.6 per cent on the week.
US employment growth has now slowed for three months in succession, prompting fears that the world's largest economy is slowing.
Worker earnings rose by 3.7 per cent in the year to May, down slightly from 3.8 per cent in April, and only barely above US inflation which is running at 3.5 per cent.
The disappointing jobs outcome was affected by the loss of some 27,000 jobs in the retail sector, while the manufacturing sector lost a further 14,000 jobs.
Austin Hughes, chief economist of IIB Bank, said US consumers were now being squeezed by oil prices and interest rates.
"Wal-Mart is noticing how its payment cycles are being affected by consumers waiting until their salary cheques arrive before spending. The fact that consumers are being stretched by higher interest rates has also hit orders for new houses," Mr Hughes said.
He added that the the European Central Bank was now less likely to raise rates by more than one quarter of a percentage point next week.
"The consequences of the numbers for Ireland are a rising euro and a softening dollar. That means less pressure on the European Central Bank to be aggressive in raising interest rates." - (Additional reporting, Financial Times Service)
