Economists were surprised by the strength of the U.S. jobs report today, but they still expect weakness in the coming months. After a couple of awful jobs reports in recent months, non-farm payrolls in the United States slipped by only 19,000 in May.

Economists were expecting something closer to 50,000, after losing hundreds of thousands of jobs in previous months. The U.S. unemployment rate dropped to 4.4%, the first decrease since last summer. While factory jobs remain weak, service sector employment actually ticked up slightly in the month.

BMO Nesbitt Burns says the danger to the U.S. economy may not have passed, but it is downshifting its sentiment from abject terror to mild concern. “Most aspects of today’s crucial release suggest that the need for additional aggressive rate cuts by the Fed is waning. While labour markets remain soft, the point of maximum risk for the economy may well have passed,” it says.

The jobless report left the crew at CIBC World Markets scratching their heads. “Sometimes the labour force data answer all questions, this time it just left markets hungry for more data,” it says. “Assuming productivity recovers now that excess jobs have been shed in manufacturing, that still points to less than 1% real GDP growth in Q2. The latest claims data suggest further job weakness ahead in June.”

RBC DS agrees, noting, “The report still paints a weak picture for the U.S. economy. Although benchmark data revisions led to upward adjustments to the more recent months, it also revealed that weakness set in the labour market earlier than first thought. And, with two back-to-back months of job declines, the risk to consumer confidence and spending has not yet been averted.”

However, economists are split on whether further cuts to interest rates are necessary. “Most leading indicators for the labour market still look quite soft, and it is probably too early to start looking for a growth rebound. The door has not yet closed on rate cuts,” concludes BMO Nesbitt Burns. Whereas DS is more upbeat, saying, ” The slower pace of job losses does raise the prospect that the worst is over, with little, if any, additional easing needed by the Fed.”