(Bloomberg) -- The argument for a June interest-rate hike fromthe Federal Reserve has evaporated.

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Economists and investors largely agreed that a disappointingemployment report for May -- the U.S. economy added just 38,000 newjobs -- largely eliminated thechance that Fed officials would tighten policy when they meet June14-15 in Washington, and may make it difficult for them to raise inJuly.

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“As cautious as this Fed has been, it’s hard to imagine thatthey’re going to go after a report like this,” said StephenStanley, chief economist at Amherst Pierpont Securities LLC in NewYork.

Comments from Fed officials in recent weeks, including ChairJanet Yellen on May 27, had signaled they were in favor of a rateincrease in coming months, with a couple of policy makers going outof their way to raise investor expectations for a move at eithertheir June or July meeting. Yellen speaks again on Monday.

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.in New York, said the report “raises some questions about themomentum of growth and about the outlook.”

“This takes June off the table for a Fed hike,” he added. “Toget to July, we’re going to need a pretty nice rebound in thedata.”

June odds

Odds of a June hike implied by futures trading, which had risenas high as 34 percent in late May as Fed officials hinted at theireagerness to raise rates, tumbled to just 4 percent following theemployment report. The odds are based on prices in federal fundsfutures contracts.

The Labor Department report released Friday showed employersadded jobs in May at the slowest pace since 2010 as unemploymentdropped to 4.7 percent, already reaching the level Fed officialsexpected to see by the end of 2016.

The decline in joblessness was hardly good news: it came aspeople left the workforce, pushing the labor force participationrate down to 62.6 percent from 62.8 percent in April. What’s more,the share of Americans working part time for economic reasonsjumped to the highest since August.

The number of jobs added in April was also revised downward to123,000 from 160,000.

Carl Tannenbaum, chief economist at Northern Trust Corp. inChicago stressed that the dismal May numbers couldn’t be dismissedas a one-month aberration.

“The revisions were so significant it does begin to paint atrend of deceleration over three months,” he said. “I find it hardto fathom we’re going to speak a month from now and find all thishas been bad dream.”

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