Markets were also lifted by the Trump administration's decision to delay planned tariffs on some Chinese goods and signs of progress in talks with Mexico, which the president has threatened with levies unless it does more to discourage illegal immigration.
Home sales have been weak this year despite a sharp drop in mortgage rates. The next FOMC meeting is in less than two weeks.
"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. In company news, shares of Barnes & Noble Inc. climbed 10.8% after the bookseller said it would be acquired by hedge fund Elliot Management Corp.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move.
The disappointing number encouraged Wall Street, however, where the three major stock indexes jumped more than one per cent as investors bet on an increased chance of a Fed interest rate cut.
"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.
His statement has been widely interpreted to mean that the Fed will cut interest rates to counteract the negative economic effects of tariffs.
The employment gains in May were well below economists' forecasts of 185,000 jobs and the three-month average of 151,000 jobs. Month over month, wages rose by 6 cents in May.
"I don't use the job numbers to predict the economy", he said.
Some of the weakness in hiring last month could be the result of worker shortages, especially in the construction, transportation and manufacturing sectors.
Average hourly earnings for all private-sector workers rose 6 cents to 27.83 USA dollars in May.
In May, wages rose 3.1% from a year earlier, down slightly from last month's gain of 3.2%.
The Atlanta Fed is forecasting gross domestic product rising at a 1.5% annualised rate in the second quarter. The economy grew at a 3.1% pace in the first quarter.
Unemployment held steady at 3.6%, a five-decade low, as workforce participation remained unchanged. That could be evidence that employers are converting part-time staff to full time, as the economy nears full employment after 104 months of continuous job creation.
Employers in the construction sector hired 4,000 workers in May. Transportation and warehousing payrolls fell as did retail employment. Historically, the Census Bureau has staffed up in early summer, but the federal government (excluding the Postal Service) only added 1,400 jobs.