USA employers added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump's trade policies weigh on growth.
Fratantoni added that the outlook for home sales and mortgage activity this summer remains brighter than a year ago, however, given that mortgage rates have fallen recently.
Hiring dried up in major industries and wage growth stagnated, and because job growth was worse than previously reported in March and April, hiring was essentially flat last month, the Labor Department reported Friday.
Some market participants doubt that U.S. stocks can keep rallying on the prospect of a rate cut alone. Last month, he increased tariffs on $200 billion in Chinese imports from 10% to 25%.
As U.S. President Donald Trump issued tariff threats against China and Mexico, US hiring slowed down during the month of May.
Manufacturing payrolls increased by 3,000 last month, after gaining 5,000 positions in April. This was behind forecasts of 180,000 and below the 100,000 level needed to keep up with growth in the working-age population.
Markets were in turmoil in the fourth quarter of 2018 when the Fed was forecasting two rate hikes for 2019, noting strong growth in jobs and wages nationwide.
Manufacturing payrolls will be watched closely for signs of the impact of the tariffs on the economy.
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"The lack of meaningful jobs growth in manufacturing, and lower-than-average wage growth in manufacturing, gives another indication that Trump's trade war is hurting workers and the economy", Seth Harris, a distinguished scholar at Cornell University's School of Industrial and Labor Relations and former acting Secretary of Labor under former President Barack Obama, told Al Jazeera.
The big miss could increase calls for the U.S. central bank, the Federal Reserve, to cut interest rates for the first time in over a decade. Another report this week showed a drop in online adverts by businesses looking for help.
"The weaker-than-expected May employment report serves as a reminder that the sun doesn't shine on the economy forever", said Mark Hamrick, senior economic analyst at Bankrate. Wages rose by an average of 3.1 percent compared with a year earlier.
The moderation in wage gains, if sustained, could cast doubts on the Fed's optimism that inflation would return to the USA central bank's 2 per cent target.
The Fed has hinted at a possible rate cut earlier this week, sending stocks up, despite some worries over the ongoing U.S.
Home sales have been weak this year despite a sharp drop in mortgage rates.
Professional and business services, which include high-paying accounting and engineering jobs, have added workers at a healthy pace this year.
The Federal Reserve Bank of Atlanta estimates that annual growth will slump to just 1.5 percent in the April-June quarter.