Blow to Donald Trump as United States jobs growth slows down

The U.S. dollar fell to seven-month lows on Friday after data showed the U.S. economy created fewer jobs than expected in May but Wall Street equities shrugged off the news to hit new highs and an index of global equity markets also set a record.

Still, investors continue to give both the economy and President Donald Trump's administration the benefit of the doubt, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

Average hourly earnings rose 0.2 percent for the month, and are up 2.5 percent for the year, but this more or less keeps pace with inflation, with the Consumer Price Index for urban consumers up 2.2 percent over the 12-month period.

"Should we see the earnings begin to decline, I do think the market will have trouble", Arone said. The Fed aims to maintain moderate inflation, rather than price stability, because that lets the Fed cut interest rates more sharply during an economic downturn.

"The rest is kind of this noise, the monetary policy, what's going on in DC", he said, referring to Washington.

"We suspect there is only limited scope for the prime age participation rate to keep rising", said Michael Pearce, a USA economist at Capital Economics in NY. That was smallest year-over-year gain since December 2015 and below the Fed's 2-percent goal.

Those gains filtered through to global stocks, lifting the MSCI All-Country World index 0.3% to a record high.

Elsewhere in currency markets, the offshore Chinese yuan CNH= eased 0.5 percent after having hit its highest level since October the previous day.

On Wall Street, the three major US indexes closed at fresh record highs. Immediately after the report, futures for the Dow Jones industrial average, the S&P 500 index and Nasdaq composite pared gains on the stock market today.

People walk past an electronic board showing stock prices outside a brokerage at a business district in Tokyo, Japan, January 23, 2017.

The greenback fell to seven-month troughs against euro and Swiss franc, while sliding from a one-week high versus the yen.

"This number is not the kind of report that derails the Fed from raising rates in June", said Tom Porcelli, chief USA economist at RBC Capital Markets in NY.

Brent crude tumbled below $50 and headed for a second week of losses on worries Trump's decision to abandon a climate pact could spur US crude drilling and worsen a global glut.

The Brent futures LCOc1 fell 0.5 percent to $50.39 per barrel, near its three-week low of $49.81 set on Wednesday.

In recent trading, the yield on the 10-year Treasury note was 2.180%, according to Tradeweb, compared with 2.201% just before the report was released and 2.217% Thursday. Fed officials view a possible scenario where two or more hikes come up before the year runs out, and a 25-basis-point increase in the later part of this month - between 1 and 1.25 percent.

The euro on Friday rose 0.6 percent against the U.S. dollar at US$1.1276, after earlier rising to a seven-month peak of US$1.1282.

It noted that "many firms reported offering higher wages to attract workers where shortages were most severe", such as a Chicago-area manufacturing firm "attracting better applicants and improving retention for its unskilled workforce by raising wages 10%". Over May, 1.7 million were in this situation and accounted for 24 percent of the unemployed.

  • Zachary Reyes