Wall Street was initially expecting to see a figure of 162,000 jobs in May and the unemployment rate hold steady at 5.0 percent. However the nonfarm payrolls number sent markets spinning after the figure came in at just 38,000 jobs. The headline unemployment fell to 4.7 percent.
Both the euro and sterling rose sharply against the dollar, after the report. The disappointing data has cast doubts on whether the Federal Reserve will raise rates in June or July.
"The U.S. nonfarm payroll data was crazy and completely unbelievable and this is the last set of important data before the Fed meeting. When you look at the data set, it really boggles your mind because the unemployment rate has ticked lower. The productivity picture is even more confusing as it is not increasing," Naeem Aslam, chief market analyst at Think Forex U.K., said in a note.
Elsewhere, European stocks have been digesting the latest news from the European Central Bank, who chose to leave rates on hold on Thursday as expected, while slightly upping its growth forecast for 2016. On the data front, the latest European services PMIs came out, with Markit's composite PMI output for the euro zone coming in at 53.1, up from April's 53.0, indicating economic growth remained subdued.