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US Stocks Surge After Dismal Nonfarm Payrolls Numbers Stock Rate-Cut Bets

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May jobs report: Hiring slowed down in May, just 75,000 jobs added

May's disappointing job growth was flagged by a report on Wednesday from payrolls processing firm ADP showing the smallest gain in private payrolls in nine years last month. Bond yields fell after the jobs data was released, signaling investor expectations for lower Fed rates.

"Economic growth is clearly slowing, as indicated by the slower pace of job growth in May, downward revisions in prior months, and a leveling out of wage growth", said Mike Fratantoni, chief economist for the Mortgage Bankers Association.

In May, wages rose 3.1% from a year earlier, down slightly from last month's gain of 3.2%.

Manufacturing and construction saw particularly anemic job growth in May, one of the clearest signs that Trump's tariffs are having a negative impact on blue-collar sectors the president has been trying to boost.

Hiring was weak last month across a broad range of industries.

"There's increasing evidence that the ongoing trade war here is beginning to have some tangible effects on the USA economy", said Tim Quinlan, a senior economist at Wells Fargo Securities.

Adding a sting to the closely watched employment report, far fewer jobs were created in March and April than previously reported, indicating that hiring had shifted into a lower gear.

USA unemployment continued to hover near a 50-year low last month, remaining unchanged at 3.6 percent, while annual wage growth in May increased 3.1 percent.

In terms of economic data, hiring in the States slowed down sharply in May after a 224,000 gain during the previous month. Wages were forecast advancing 3.2% in the 12 months to May. Manufacturers added only 3,000 jobs, a fourth straight month of anemic gains.

Some market participants doubt that United States stocks can keep rallying on the prospect of a rate cut alone. In the first five months of this year, hiring has averaged 164,000 a month, a solid pace that is enough to lower the unemployment rate over time.

A trade war, too, may make the US less reliant on cheap products from overseas - but only after painful adjustments "weighing on growth for years to come". Growth is cooling as the massive stimulus from last year's tax cuts and spending increases fades.

The department's report said employment continued to trend up in professional and business services and healthcare.

President Donald Trump has put a 25 percent tariff on $250 billion of annual Chinese imports and, on June 6, said he'll make a decision after the G20 Summit in late June on whether to expand the tariffs to another $300 billion worth of products. Retail, on the other hand, slashed 7,600 jobs as liquidations and bankruptcies hit retailers such as Sears and K-Mart and others faced pressure to raise wages to compete for employees in a tight labor market.

In May, non-farm payrolls increased by only 75,000, much less than the predicted 185,000 jobs.

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