Friday’s U.S. jobs report was a mixed bag. Although fewer than expected new jobs were created, the unemployment rate dropped. Overall, economists remain unimpressed.

Non-farm payroll employment rose less-than-expected, by just 41,000, in May, and April’s numbers were revised down to just 6,000 new jobs (originally reported at 43,000). However, the unemployment rate dropped unexpectedly to 5.8% from 6%.

On balance, economists are seeing the report negatively. “Further evidence of a still weak labour market was provided by data on work hours,” notes Bank of Montreal. “The index of aggregate weekly hours fell 0.1% in May, erasing a similar-sized increase in the previous month.”

CIBC World Markets says that the payrolls rise and last two month’s revisions put job gains on a slightly slower track than its forecast. “Without another productivity miracle, Q2 GDP will see a considerable slowdown. We’re sticking to our forecast for a 2.7% real GDP advance in Q2, and for the Fed to stay on hold longer than the market now expects.”

“On net, the May employment figures, considered broadly, were not far from expectations,” says BMO Nesbitt Burns. “If subsequent data from the always-volatile household survey confirm that joblessness is actually falling, it would open the door for Fed tightening. But the adverse trend in claims for jobless insurance suggests that that development is far from a foregone conclusion.”

Nesbitt’s friends at the bank are less positive, suggesting that rate hikes are further off. “In light of today’s report, we now believe the Fed is more likely to begin tightening at the September 24 FOMC meeting instead of the August 13 session. Should the job market continue to lag the recovery, the Fed could remain sidelined even longer,” it says.

“Today’s U.S. labour market numbers will leave battle-weary equity markets feeling like there is no light at the end of the tunnel,” says RBC Financial. Nevertheless, RBC continues to believe that the first Federal Reserve rate hike will be in August.

TD Bank says that the Federal Reserve will hold off on raising interest rates until September, “when more firm evidence of a recovery in the economy is at hand”.