FILE PHOTO: A pedestrian passes a "Help Wanted" sign in the door of a hardware store in Cambridge, Massachusetts, U.S., July 8, 2022. REUTERS/Brian Snyder/File Photo

By Chuck Mikolajczak

NEW YORK (Reuters) -U.S. job growth slowed in May, while the unemployment rate held steady, potentially giving the Federal Reserve a buffer to delay the resumption of interest rate cuts.

Nonfarm payrolls increased by 139,000 jobs last month after rising by a downwardly revised 147,000 in April, the Labor Department said on Friday.

Economists polled by Reuters had forecast 130,000 jobs added last month after a previously reported 177,000 advance in April.

The unemployment rate held steady at 4.2% and matched expectations.

MARKET REACTION:

STOCKS: S&P 500 E-minis added to gains and were up 51.25 points, or 0.86%

BONDS: The yield on benchmark U.S. 10-year notesrose 6.5 basis points to 4.46%, the two-year note yield climbed 6.9 basis points to 3.993%FOREX: The dollar index extended gains a loss and was up 0.49% to 99.17, while the euro was down 0.44% at $1.1394

COMMENTS:

JOSH JAMNER, INVESTMENT STRATEGY ANALYST, CLEARBRIDGE INVESTMENTS, NEW YORK

“May's jobs report showed continued resilience for the labor market as the bite from tariffs began to impact the U.S. economy. Solid job gains along with a pickup in wages mean that aggregate incomes are continuing to grow 5% (year-over-year), which provides a solid foundation for continued consumption.

"The Fed is likely to continue to have little urgency to change course in light of today’s steady jobs report, with scant evidence that the labor market is in imminent need of policy support. Fed Fund futures priced out one-quarter (percent) of a rate cut at September FOMC meeting following the jobs report, which is pushing up rates along the yield curve. The move higher at the long end could curb the upside for equities, but overall today’s report should be supportive for risk assets and embedded earnings expectations near term.”

GARY SCHLOSSBERG, GLOBAL STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, SAN FRANCISCO, CA

"The report itself is a positive report overall, in line with expectations, with the employment number a little bit stronger than expected. It shows the labor market is still intact."

"There's one blemish there that stands out. The household-based employment number that's used in the calculation of the unemployment rate was down sharply. There was a big increase in both the household-based employment number and in the supply of Labor in April. We just reversed both by a large amount in such a way that the unemployment rate remains steady. We were afraid it would be going higher and the fact that it held steady is an encouraging sign."

"The market is taking the jobs report as a sign the economy is still holding up well. It's not that we're powering ahead. Its moderate growth but there's little sign we're losing momentum from the jobs report mid-way through the second quarter."

MALCOLM POLLEY, CHIEF MARKET STRATEGIST, STRATOS INVESTMENT MANAGEMENT, BEACHWOOD, OHIO

“If you look at the trend, it looks like job growth actually bottomed mid/late next year, so the trend looks to be higher. As interesting as today’s numbers were, the more interesting data were yesterday’s – the unit labor costs and productivity. Productivity was lower and labor costs higher. That ultimately translates into higher inflation.

"As long as job growth holds up, the employment data is positive. The other piece of this, in my mind, if you already have had more job openings than candidates, does it make sense to post another job? We cannot find qualified people, I keep hearing. The bottom line, is that the Fed is likely to stay on hold.”

ART HOGAN, CHIEF MARKET STRATEGIST AT B RILEY WEALTH

"Things are slowing, but they're not collapsing and that's the good news. We're not seeing a serious degradation of the jobs market."

WILL COMPERNOLLE, MACRO STRATEGIST, FHN FINANCIAL, CHICAGO

“The sell-off (in Treasuries) really reflects this idea that growth sentiment is heading in a bullish direction. We have yet another month of hard data resilience. There is positive progress on tariffs moderating, even if there's nothing final yet. And a lot of the doomsday scenarios people thought were always one month away - it just seems to be a less likelihood that it's coming.

"There's relief, or bearish for bonds, that there are no signs of significant deterioration that people were expecting.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"The rise in payrolls was better than expected, but the previous months were revised significantly lower, taking some sheen off this report. The diffusion index for manufacturing was abysmally low, showing that payroll gains are concentrated while losses are widespread. On its face, this shows an economy that’s holding up under the weight of a trade war, but the details show plenty of cracks forming."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“Payrolls came in a little higher than consensus and more than I was looking for, but basically with the exception of hourly wages, the report really doesn't indicate that the Fed would be ready to do anything to help out the labor market.

“In fact, the rise in hourly wages by 0.4% - I don't want to say significant, but it's noticeable. And so that you know just means that the Fed stays on hold and the labor market, although there are definitely signs that it's cooling and obviously that's attributed to the trade war because many people are not hiring due to the uncertainties.

“Bottom line, it’s a report that's not going to move the markets very much and I would, I would classify this as a mediocre report.”

JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND VIRGINIA

"The labor market is strong, but cooling. I expect this report, with all its revisions to bring the Fed back into cutting mode in July. Wages are stable, for now, but that is likely to change in the coming months.

"One of the biggest factors with labor is housing - the housing market is showing early signs of trouble, and a cooling labor market will make that worse."

(Compiled by the Global Finance & Markets Breaking News team)