American employers added just 38,000 jobs in May, the weakest monthly gain since September 2010 and less than one-quarter of what economists expected, raising new doubts about the strength of the labor market and the likelihood that the Federal Reserve will raise interest rates this month.

The unemployment rate fell three-tenths of a percentage point to 4.7 percent, its lowest level since November 2007, but largely because 458,000 people left the labor force. The Bureau of Labor Statistics report released Friday showed labor-force participation declining to 62.6 percent and the number of people working part time for economic reasons rising by 468,000 to 6.4 million.

Weakness extends beyond a major strike

A strike by about 35,000 Verizon workers weighed directly on payrolls because employees not receiving wages during the survey period are counted as unemployed. Adding those positions back would bring the headline gain to roughly 73,000—still well below the recent pace. The walkout began April 13 after contract negotiations stalled over outsourcing, pension changes and the company’s ability to reassign workers; a tentative settlement was reached May 27. A Washington Post account of the strike detailed the dispute over flexibility and the movement of jobs.

The weakness was broad. Construction lost 15,000 jobs, mining shed another 10,000 and temporary-help services declined by 21,000. Manufacturing employment fell by 10,000. Health care was the principal source of strength, adding 46,000 jobs across ambulatory services, hospitals and nursing facilities.

Revisions deepened the disappointment. The government lowered March’s gain from 208,000 to 186,000 and April’s from 160,000 to 123,000, a combined reduction of 59,000. Over the previous three months, payroll growth averaged 116,000—far below the 219,000 monthly average during the preceding year.

The Washington Post’s report on the release called May the weakest hiring month since the early recovery and noted that the slowdown conflicts with signs of improving consumer spending and housing activity.

A lower unemployment rate sends a mixed signal

The unemployment rate ordinarily falls when hiring strengthens. In May it fell while the household survey showed fewer people employed and fewer looking for work. Because people must actively seek a job to be counted as unemployed, departures from the labor force can improve the headline rate without reflecting better opportunities.

Participation has declined four-tenths of a percentage point over two months, reversing its first-quarter improvement. Part of the long-term decline reflects retirement among baby boomers, but the monthly drop makes the 4.7 percent unemployment rate less reassuring.

Other measures tell the same complicated story. Long-term unemployment fell by 178,000 to 1.9 million, and average hourly earnings rose five cents to $25.59, up 2.5 percent from a year earlier. At the same time, involuntary part-time work increased sharply. The broad U-6 measure of unemployment and underemployment remained at 9.7 percent.

A separate Washington Post analysis cautioned that monthly payroll estimates carry a margin of error of roughly 100,000 and that the Verizon strike created unusual noise, but concluded that the underlying gain was still weak.

The Federal Reserve faces a harder decision

Federal Reserve officials had spent recent weeks preparing markets for a possible increase in the federal funds rate at their June 14–15 meeting. Chair Janet Yellen said last week that another increase would probably be appropriate in coming months if the economy continued to improve. The May report makes the first part of that condition harder to establish.

The central bank raised rates in December for the first time in nearly a decade, then paused as global markets weakened and American growth slowed. First-quarter gross domestic product expanded at a 0.8 percent annual rate under the Commerce Department’s second estimate issued May 27. Consumer spending has since strengthened, but business investment and exports remain soft.

The Fed’s June Beige Book, based on reports from its 12 regional banks, described modest economic growth and generally tightening labor markets. Friday’s national data do not necessarily overturn that assessment, but they substantially raise the cost of tightening too soon.

Financial markets responded immediately. Treasury yields fell, the dollar weakened and traders reduced the probability they assigned to a June rate increase. A Guardian report on the market reaction said economists widely viewed a June move as unlikely after the payroll number missed the consensus forecast by about 122,000.

Politics absorbs an ambiguous report

The figures entered a presidential campaign already centered on wages, trade and economic insecurity. Donald Trump called the report “terrible” and evidence of failure under President Obama. Democrats pointed to 75 consecutive months of private-sector job growth and an unemployment rate less than half its recession peak, while acknowledging that hiring must accelerate.

Both accounts select real pieces of the data. The economy has added millions of jobs since 2010 and household incomes are benefiting from lower unemployment and modestly faster wages. Yet May’s results show that the expansion is not self-sustaining enough to dismiss a sharp loss of momentum.

The contemporaneous tally of forecasts put expected hiring near 160,000. Missing by such a margin will shape policy and political claims even if later revisions soften the number.

One month does not establish a turn

Employment statistics are estimates, revised twice as more employer reports arrive. The Verizon workers will return to payrolls after the settlement, mechanically lifting a later month. Seasonal adjustment and sampling variation can also create abrupt swings.

But the three-month slowdown, downward revisions and participation decline make it difficult to treat May as only an aberration. Employers in cyclical industries are showing caution, energy-sector layoffs continue and temporary-help employment—a possible leading indicator—has weakened.

The next evidence will determine whether this is a pause or a turning point. For now, the report changes the balance facing the Fed: inflation remains below its 2 percent target, job creation has slowed and millions remain outside the labor force or unable to secure full-time work. A central bank that had been asking when to raise rates must again ask whether the economy is ready.