US economy stumbles by creating just 75,000 jobs in May - as it happened

Dollar slides after America only created 75,000 new jobs last month, weaker than the 175,000 expected

• Latest: US job creation unexpectedly weak last month
• NFP up by 75,000 in May
• Earnings growth drops to 3.1%
• Jobless rate at 49-year low of 3.6%
• Will Fed respond by cutting interest rates?

4.14pm BST

Time for a recap

Job creation slowed sharply in America last month. Just 75,000 new jobs were created in May, down from 224,000 created in April. Economists had expected 175,000 to be created.

US average hourly earnings growth turned down in May from 3.2%Y/Y to 3.1%. #NFP pic.twitter.com/FHwLfrtpGr

"Market's wanted a soft jobs report, but not quite this soft. It's too cold for a Goldilocks economy

On balance, we still think Fed officials will want to see evidence of more sustained weakness before taking action, but we are increasingly convinced that the Fed will begin cutting interest rates later this year.

It's hard to believe that a roadblock in the Chinese talks could have a major macroeconomic effect.

US futures flying this afternoon:#DOW 26005.44 +1.11%#SPX 2877.15 +1.18%#NDX 7413.99 +1.90%#VIX 15.84 -0.56% pic.twitter.com/qRdOP99Viw

3.47pm BST

European stock markets are also roaring higher (as traders look longingly towards the end of the week).

In London the FTSE 100 is up 82 points, on hopes that a US interest rate cut might boost the global economy.

3.33pm BST

Wall Street is pushing higher; the Dow is now up 259 points or 1% at 25,980.

S&P 500 gains more than 1% as weak jobs growth spurs rate cut bet https://t.co/2lV78SsiUJ pic.twitter.com/XGUpH4LD8z

3.24pm BST

3.19pm BST

One more weak jobs report and the Fed could cut borrowing costs, predicts Ronald Temple, Head of US equity at Lazard Asset Management:

"The Fed has already set the stage for easing based on below-target inflation and escalating trade tensions. If tariffs increase as currently scheduled and we get another sluggish job report next month, I believe that it would be difficult to criticize a rate cut on July 31.

2.59pm BST

Donald Trump's top economic advisor (for a little longer anyway) is discussing the jobs report on Bloomberg TV.

Kevin Hassett, head of the Council of Economic Advisors, denies that the escalation in the US-China trade war caused the drop in jobs creation.

It's hard to believe that a roadblock in the Chinese talks could have a major macroeconomic effect.

White House economist Kevin Hassett blames flooding in the Midwest for the disappointing jobs number, not trade tensions, via @BloombergTV @FerroTV

Hassett: Trump will be briefed on the discussions with Mexico when he lands today at 4:30 returning from Europe and he will make a decision then.

2.41pm BST

Ding ding! The New York stock market is open for business, and shares are rising.

"Disappointing non-farm payrolls have now joined inflation and trade tensions as matters of concern for the US economy. 75,000 jobs were added in May against an average forecast of 175,000, which shows that the poor read in February was not just a one-off blip and that Trump's tariffs rhetoric is highly likely to be having a negative impact on the much-lauded US labour market.

"What will the Fed's response be when it convenes for a regular meeting on 19 June? Will it change its forward guidance, increasing the likelihood of an interest rate cut in July? Or it may decide to bite the bullet and get ahead of the market."

2.36pm BST

This neat chart shows how America's economy has been creating jobs steadily since the end of the last recession a decade ago - matching the rise in stocks.

Update to one of my favorite charts. NFP in blue and Russell 3000 in red. cc @TheStalwart pic.twitter.com/vS7jM9LMYy

2.29pm BST

Josie Dent, senior economist at the CEBR thinktank, also spies a US interest rate cut on the horizon.....

She says:

Positive economic growth in Q2 2019 will mark the 10th year of continuous expansion of the US economy. However after today's labour market release, few people will be celebrating. With markets also spooked by the trade war, the Federal Reserve Open Market Committee (FOMC) is under pressure to cut rates.

This could come as soon as next month."

2.18pm BST

Several financial experts are predicting that the US Federal Reserve will cut interest rates, perhaps twice, before the end of 2019.

US interest rates are currently 2.5%, having been hiked four times in 2017 and again in 2018. That's much higher than in rival advanced economies such as the eurozone (0%) and the UK (0.75%).

Fed Chair Jay Powell spooked investors this week as he pointed towards a potential rate cut as part of a dovish repositioning among major central banks, amid fears of faltering global economic growth.

Given today's missed labour and earnings data, a continued downtrend in the jobs market may force the US Central Bank to unwind some of 2018's rate hikes in the second half of 2019.

Mkts now price 3.3 rate cuts within the next 12mths following bad US jobs report. pic.twitter.com/xulYL6wFqx

2.10pm BST

This weak jobs report is another sign that Donald Trump's trade war with China is hurting the US economy.

Richard Flynn, UK Managing Director at Charles Schwab, says trade tensions are a key worry.

"Today's disappointing job numbers come hot on the heels of last week's GDP figures, where economic growth was revised down, albeit by less than expected. However, in general the US economy has remained robust in recent months in spite of escalating trade tensions and global headwinds.

"The ongoing concern facing investors is the back and forth around rising tariffs from both sides of the U.S.-China trade dispute, with the ball currently in the Americans' court. The near-term impact on the market is easy to see but determining the longer-term economic impact is more difficult.

1.58pm BST

1.54pm BST

Let's get some details on the weakest US jobs report in three months.

The government cut 15,000 jobs in May, according to the Bureau of Labor Statistics, while private companies hired 90,000 people.

The unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (12.7 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (2.5 percent), and Hispanics (4.2 percent) showed little or no change in May.

1.46pm BST

Today's report is the weakest since February, and it suggests America's economy is losing momentum.

Bloomberg says:

U.S. employers last month added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and likely boosting calls for a Federal Reserve interest-rate cut as President Donald Trump's trade policies weigh on the economy.

Payrolls rose 75,000 after a downwardly revised 224,000 advance the prior month, according to a Labor Department report Friday that missed all estimates in Bloomberg's survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.

Correct: U.S. adds 75,000 jobs in May, unemployment falls to 3.6%. Wage gains also cooled https://t.co/aLszXzyyjQ

1.43pm BST

Some Wall Street economists may be nervous about their own job security.

None of the financial experts who make predictions for a living thought today's non-farm payroll report would be so weak. Some thought more than 200,000 new jobs would have been created.

NFP vs. Economist Forecasts: (Actual release was below the lowest forecast) pic.twitter.com/NQCY6P8CLc

1.37pm BST

This weak jobs report appears to increase the chances that America's central bank cuts interest rates soon.

This is forcing the US dollar down in the international markets.

Dollar plummets on weak payrolls number.#USD -0.27% against other currencies#EURUSD 1.13062 +0.27%#GBPUSD 1.27376 +0.34%#USDJPY 108.131 -0.26%#USDCAD 1.33087 -0.4%#AUDUSD 0.69878 +0.15%#USDCHF 0.98888 -0.24%

Boom! The US 2-year Treasury #yield falls to 1.81% after disappointing #payrolls. pic.twitter.com/nsaM1AIgWC

1.35pm BST

Despite the weak job creation in May, America's unemployment rate remains at just 3.6%, the lowest level since 1969.

But earning growth has slowed to 3.1% compared with a year ago, down from 3.2%. That's another disappointment.

More: The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% https://t.co/iC6D12kOy1 pic.twitter.com/4DTO7g1LVj

1.31pm BST

Newsflash: Just 75,000 jobs were created across the US economy last month.

That's much weaker than expected (Wall Street expected the non-farm payroll to rise by 175k ish)

1.26pm BST

It's nearly time for the last major economic news of the week - the US jobs report for May.

Jobs creation is expected to have slowed last month, with the non-farm payroll tipped to increase by around 175,000, from 263,00 in April.

1.22pm BST

As things stand, European stock markets are on track for their best week since April.

Britain's FTSE 100 index has gained 150 points, or around 2%, so far this week. That means around two-thirds of the losses suffered in May have been clawed back.

If growth softens more than expected, central banks will hold against it. The top central bank of the world, the US Fed, has significant ammunition left to do so. The ECB would have to break new ground. But it would do so eventually if need be even under a hypothetical German ECB president.

Unexpectedly robust growth in early 2019 may have encouraged Trump to escalate trade tensions in the last four weeks. If US growth now falls short of expectations and/or equity markets suffer badly, he may become more inclined to strike partial trade deals so that he can still campaign for re-election on an "I created jobs" platform.

1.13pm BST

Chris Hunt, retail partner at Gowling, reckons Elliott's takeover of Barnes & Noble makes sense:

"It is encouraging to see an example of the high street increasing the strength of its amour against the ongoing battle to retain physical stores.

The international element of the tie up will also help in term of supply chain capabilities and delivering against fast moving customer needs more closely than ever before - as ever, in-store experiences are likely to be a key feature of retaining the increased network of physical outlooks as the battle to co-exist with online sales continues in earnest."

12.46pm BST

Books news! US bookseller Barnes & Noble is being acquired by the owners of the UK's Waterstones book store group.

While each bookseller will operate independently, they will share a common CEO and benefit from the sharing of best practice between the companies. Waterstones has successfully restored itself to sales growth and sustainable profitability, based on a strategy of investment in their store estate and the empowerment of local bookselling teams.

Under Daunt's leadership and Elliott's stewardship, this commitment to bookselling excellence will strengthen the ability of both companies to navigate with success a rapidly changing retail landscape.

Activist firm Elliott Management to buy Barnes & Noble for ~$683M including debt; in the past five years, B&N has lost more than $1 billion in market value (Lauren Hirsch/CNBC) https://t.co/Kqztd3WmmG pic.twitter.com/o9iDSCDGNJ

12.21pm BST

Back in the UK, banks have been rebuked for hitting customers with unfairly high overdrafts.

The Financial Conduct Authority is bringing in new rules that outlaw fixed daily or monthly fees for overdrafts. The watchdog will also block banks from imposing higher fees for unauthorised overdrafts.

Related: City regulator bans high overdraft fees to reform 'dysfunctional' market

@TheFCA decision to make overdrafts simpler & fairer is right one.
Why should richest in society have free banking subsidised by poorest?

@TheFCA reckons the typical cost of borrowing 100 thru' unarranged overdraft will fall from 5 a day to <20p a day.
Banks made 2.4bn out of overdrafts in 2014 - 30% thru unarranged overdrafts.
So that's a big hit to bank revenue.
How will they replace it?

12.03pm BST

Here's my colleague Jasper Jolly on the worrying decline in German factories in April:

German exports and industrial output fell sharply in April, triggering fresh fears that trade tensions and continued Brexit uncertainty are weighing on the global growth outlook.

Industrial production in Europe's largest economy fell 1.9%, which was the worst monthly fall in almost four years, according to Germany's statistics office. It was much worse than the 0.4% decline forecast by economists.

Related: German trade decline raises fears over global economy

11.56am BST

Germany's Brexit boost has fizzled out, agrees Edward Moya of trading firm OANDA.

He says:

It appears German factories are no longer benefiting from Brexit stockpiling and industrial production fell to the a near four year low, prompting many to believe first quarter momentum did not carry over.

With external risks are rising in the eurozone, German manufacturing remains exposed to possible further weakness on Brexit risk and the impending US-Europe tariff battle.

11.26am BST

Economists often like to blame unexpectedly weak data on 'seasonal factors', or other one-off events.

In Germany's case, we've had disruption in the car industry as new emissions test were introduced. Weather has also been a factor - including heavy snow last winter and unusually low levels on the Rhine (messing up transportation).

German Industrial Production...

For the next time that you hear it is "seasonal" pic.twitter.com/S8pecLOUnV

10.53am BST

Andrew Kenningham of Capital Economics is also concerned that Germany's economy remains weak.

He told clients that growth appears to have slowed in recent months (having expanded by 0.4% in January-March).

The fall in industrial production in April adds to the evidence that Germany has not shaken off the problems which hit it nearly a year ago, and suggests that the economy slowed sharply in the second quarter of the year.

German industry is still struggling with both domestic and external headwinds, including the weakness of global trade, slowdown in household consumption growth and regulatory confusion in the auto sector.

10.33am BST

Economist Dr Klaus Borger from the KfW banking group has said the German economy has suffered "a black eye", adding:

"Industry had a severe backfire in April, which is also reflected in very weak exports."

10.00am BST

Back in the UK, the public's long-term expectations of inflation have hit their highest level since the last financial crisis.

A Bank of England survey found that people expect inflation to be 3.8% on average in five years time. That's up from 3.4% in the last poll, back in February.

The #British public's expectations for #inflation in five years' time have jumped to their highest in more than a decade, #BankofEngland data showed on Friday.https://t.co/zF4pExaU6Q

9.40am BST

Swedbank analyst Andreas Wallstrim has shown how German industry has been on a downward path for some time:

Very weak numbers out from Germany this morning. Both exports (-3.7% m/m) and manufacturing production (-1.9% m/m, see chart) plunged in April. pic.twitter.com/YhcF1cO2Fy

9.26am BST

The news that Germany's economy struggled so much in April has sent European stock markets.... higher!

The main indices are all up around 0.7%, led by energy companies, technology firms and industrial groups.

German industrial output falls 1.9% in April, worst decline since August 2015. Bundesbank downgrades German economic growth forecast to 0.6% for 2019.

9.00am BST

Germany's central bank has just slashed its growth forecasts, confirming that dark clouds are enveloping the economy.

"The German economy is currently experiencing a marked cooldown.

This is mainly due to the downturn in industry, where lacklustre export growth is taking a toll.

"For economic growth and, to a lesser extent, for the rate of inflation, it is the downside risks that predominate as things stand today."

8.38am BST

This chart confirms that German factories had their worst month in four years:

Germany Industrial Production
YoY
-1.8% expected -0.4%
-1.9% MoM expected -0.5% #GroundZero pic.twitter.com/8ziE4D7wUP

8.25am BST

Carsten Brzeski of ING says Germany's economy has made 'a horrible start' to the second quarter of 2019.

He's alarmed by the 1.9% drop in industrial production in April, and the stomach-churning 3.7% dive in exports.

German industry had a disappointing start to the second quarter. Both industrial production and trade fell in April, adding to the latest concerns that the eurozone's largest economy will not be able to maintain its growth pace of the first quarter of the year.....

Let's be clear, this is a horrible start to the second quarter for German industry, as global trade tensions as well as temporary problems in the automotive sector and chemical industry have left their marks.

The German export sector also continues to suffer from the trade conflict. But it's not all gloom and doom. Maybe it was hoarding in the run up to the first Brexit deadline but exports to the UK increased in the first few months of the year. In fact, German exporters almost sold as much to the UK as to China over this period.

8.17am BST

This latest decline in German factory output is disappointing, says Nadia Gharbi, economist at Pictet.

A disappointing start to Q2.
Industrial production fell by 1.9% m-o-m in April. The y-o-y rate fell to -1.8% from -0.9% in March.
By sector:
Manufacturing prod: -2.5% m-o-m
Energy prod: -1.1% m-o-m
Construction: +0.2% m-o-m pic.twitter.com/jElbEvhqWl

8.10am BST

Economist Christophe Barraud believes Germany is also suffering from the slowdown in global trade growth, since the US and China escalated their trade dispute.

#Germany Apr. Exports M/M: -3.7% a- v -0.9%e (largest a since Aug. 2015)
*Imports M/M: -1.3% v -0.2%e

a As a very sensitive country to global trade, the significant decline in exports confirms that the global momentum has reversed significantly since 4Q18. pic.twitter.com/gl0IkbYtJV

8.06am BST

Danske Bank also believes there's a Brexit effect.

They suggest that German exports tumbled in April because UK firms stopped stockpiling goods, after Britain's exit from the EU was delayed until October.

Really easy to see #UK companies stockpiled goods ahead of the original #Brexit day in the German exports data released this morning pic.twitter.com/W3CWpGM19l

8.00am BST

Brexit appears to have taken a bite out of German exports in April.

Destatis reports that a22.3bn of goods were exported to EU countries who aren't in the eurozone, a plunge of 8.7% compared with April 2018. Imports from such countries rose by 0.7%, to a18.2bn.

7.47am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A flurry of weaker-than-expected economic data from Germany this morning has heightened fears over the health of the global economy.

#Production in April 2019: -1.9% seasonally adjusted on the previous month. https://t.co/opIbrUPKAH pic.twitter.com/nq1nA0v5Du

German exports in April 2019: -0.5% on April 2018. https://t.co/RMD97t1sKc #foreigntrade pic.twitter.com/NZf0N91MDP

The near term direction for the markets depend on whether the gate is open or shut. Should the NFP disappoint, expectations of a Fed cut potentially as soon as June or July could rise.

The CME FedWatch shows the markets are seeing a 22% probability of a hike in June and a 55% probability of a hike in July.