Weak US jobs report in US triggers instant fall in dollar

The US economy created the fewest new jobs in almost two years last month, according to government figures that triggered an instant fall in the dollar.

The US economy created the fewest new jobs in almost two years last month, according to government figures that triggered an instant fall in the dollar.

Employers added only 78,000 workers to their payrolls in May, the government said - the weakest number in 21 months and far fewer than the 185,000 expected by economists. The weak data, combined with an unexpectedly strong surge in service sector activity in eurozone, pulled the beleaguered euro away from its eight-month lows.

The dollar also fell against the yen and the pound as analysts said the weak jobs report added to the feeling that the Federal Reserve was close to ending its programme of interest rate rises. The euro rose to a high of $1.2343, recouping some of the ground from its precipitous fall this week to an eight-month low of $1.2157.

It triggered a surge in commodity prices as investors sought alternatives. Copper prices hit a 16-year high, oil prices rose while gold futures in New York held at three-week highs.

The figures showed that the number of jobs created by the US's services industry fell from 232,000 in April to 64,000 in May. There were downward revisions to the payroll figures over the previous two months.

But analysts said the currency movements could be short-lived as the US and eurozone reports contained mixed messages. "Euro sentiment right now is horrible and as long as that remains the case, the dollar should remain well supported generally," said Ronald Simpson, the head of global currency analysis at Action Economics in New York.

Economists said that while the fall in job creation was disappointing, the news was offset by a survey of households, which showed a thumping total of 376,000 joining the workforce. Ian Morris, a US economist at HSBC, said: "It's a schizophrenic report - weak jobs growth according to payrolls but booming according to the household survey."

In the 12-nation eurozone, the acceleration in the growth rate of the services sector called a halt to a run of poor news. "The outturn will reduce the expectations of an emergency rate cut from the European Central Bank," said Lucy Hartiss, an international economist at Capital Economics.