By Lucia Mutikani

WASHINGTON (Reuters) - U.S. job growth likely slowed in May, with wages coming off the boil, potentially allowing the Federal Reserve to skip an interest rate hike this month for the first time since embarking on its aggressive policy tightening campaign more than a year ago.

Nevertheless, the Labor Department's closely watched employment report on Friday is expected to still show the labor market remaining tight. The unemployment rate is forecast climbing to 3.5% from 3.4% in April but the report will confirm that the economy remained far away from a dreaded recession, though more pockets of weakness are emerging.

"The jobs report is likely to show another step down in the pace of growth, but still a very strong labor market," said Bill Adams, chief economist at Comerica (NYSE:CMA) Bank in Dallas. "The Fed is under less pressure to raise interest rates at its meeting this month, than at any time over the last year and a half."

The survey of establishments is likely to show nonfarm payrolls increased by 190,000 jobs last month after rising 253,000 in April, according to a Reuters survey of economists.

It would mark a slowdown from the monthly average of 285,000 in the first four months of this year, but stay well above the 70,000-100,000 needed per month to keep up with growth in the working-age population.

Data for March and April would be closely watched for revisions. The government lowered employment gains in February and March by a combined 149,000 last month.

Despite massive layoffs in the technology sector after companies over-hired during the COVID-19 pandemic and the drag from higher borrowing costs on housing and manufacturing, the services sector, including leisure and hospitality, is still catching up after businesses struggled to find workers over the last two years. Industries like healthcare and education also experienced accelerated retirements.

The backfilling of these retirements and increased demand for services are some of the factors driving job growth. Pent up demand for workers was underscored by Labor Department data this week showing there were 10.1 million job openings at the end of April, with 1.8 vacancies for every unemployed person.

But cracks are emerging. A Conference Board survey on Tuesday showed the share of people viewing jobs as "plentiful" dropped in May to the lowest level since April 2021.

While the Fed's "Beige Book" report on Wednesday described the labor market as having "continued to be strong" in May, it noted that "many contacts" were "fully staffed," and some "were pausing hiring or reducing headcounts."

Temporary help employment, a harbinger for future hiring, is down by 174,000 since its peak in March 2022.

PROGRESS ON INFLATION

But the overall labor market remains upbeat, with first time applications for state unemployment benefits hovering at very low levels. Most economists expect payrolls growth to continue at least through the end of the year.

Average hourly earnings are expected to have risen by 0.3% after jumping 0.5% in April, which was attributed to a calendar quirk. That would keep the year-on-year increase in wages unchanged at 4.4% in May. Annual wage growth averaged about 2.8% prior to the pandemic.

Slowing wage inflation is corroborated by other measures like the Atlanta Fed's wage tracker, which has come off its peaks. Government data on Thursday showed sharp downward revisions to unit labor costs in the first and fourth quarters.

"We're making progress on inflation, you can't expect the inflation problem to go away in a year," said Brian Bethune, an economics professor at Boston College. "It doesn't make sense to push the economy into some kind of artificial recession, because you're going to do more harm than good."

Financial markets see a nearly 70% chance of the Fed keeping its policy rate unchanged at its June 13-14 meeting, according to CME Group's (NASDAQ:CME) FedWatch Tool. The Fed has raised its benchmark overnight interest rate by 500 basis points since March 2022.

The average workweek is forecast unchanged at 34.4 hours. Some companies are probably reducing hours rather that cut jobs.

The household survey from which the unemployment rate is calculated is likely to show solid employment gains, though an ongoing strike by 11,500 members of the Writers Guild of America poses a downward risk. The Labor Department's Bureau of Labor Statistics, which compiles the employment report, did not record the work stoppage in its May strike report.

"Those striking workers could show up as unemployed in the household survey, however," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was likely unchanged at 62.6% after a recent surge in participation in the prime age group.

By Ankur Banerjee

SINGAPORE (Reuters) - Asian stocks surged on Friday as the progress on the bill to raise U.S. debt ceiling and increasing hopes that the Federal Reserve might stand still on interest rates in its next meeting helped perk up investor appetite for risky assets.

The U.S. Senate is on track to pass a bill to lift the government's $31.4 trillion debt ceiling late on Thursday in Washington, Democratic Majority Leader Chuck Schumer said, after the House of Representatives passed the bill on Wednesday.

The Treasury Department has warned it will be unable to pay all its bills on June 5 if Congress fails to act.

MSCI's broadest index of Asia-Pacific shares outside Japan spiked 1.13% higher. Australia's S&P/ASX 200 index rose 0.57%, while Japan's Nikkei was 0.71% higher.

China shares have been hamstrung by worries over stuttering post COVID-19 recovery. The Shanghai Composite Index was set to open 0.2% higher while, Hong Kong's Hang Seng index was set to open up 2% higher.

Data overnight showed the number of Americans filing new claims for unemployment benefits increased modestly last week and private employers hired more workers than expected in May, pointing to continued labour market tightness.

Harry Ottley, an economist at Commonwealth Bank of Australia (OTC:CMWAY), said the signs of slowing wage pressure has raised hopes that the Federal Reserve will pause raising interest rates in two weeks.

Traders have steadily dialled back their bets on the Fed raising interest rates in two weeks, with markets pricing in a 20% chance of the central bank hiking by 25 basis points compared to 50% chance a week earlier, according to CME FedWatch tool.

"Investors were also buoyed by news that the U.S. House of Representatives had passed a U.S. debt ceiling bill in a crucial step to avoid a U.S. default, with the measure moving to the US Senate," CBA's Ottley said.

Focus now shifts to the Labor Department's closely watched unemployment report for May, due on Friday. The data will help determine whether the Fed sticks with its aggressive rate hikes.

Comments from Fed officials also helped embolden Fed pause hopes, with Philadelphia Federal Reserve President Patrick Harker saying U.S. central bankers should not raise interest rates at their next meeting.

"It's time to at least hit the stop button for one meeting and see how it goes," Harker said.

Overnight, the Nasdaq and S&P 500 closed at their highest since August 2022 as investors embraced a resilient labor market amid optimism the Fed can engineer a soft economic landing.

U.S. Treasury yields also fell on Thursday. In early Asian hours, the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.6 basis points at 4.347%, having slipped around 5 basis points on Thursday.

The yield on 10-year Treasury notes was up 0.2 basis points to 3.610%, while the yield on the 30-year Treasury bond was down 0.6 basis points to 3.829%.

In the currency market, the dollar index, which measures U.S. currency against six major peers was flat after dropping 0.6% overnight, with the euro up 0.01% to $1.0762.

The Japanese yen weakened 0.11% to 138.93 per dollar, while Sterling was last trading at $1.2527, up 0.02% on the day.

U.S. crude eased 0.01% to $70.09 per barrel and Brent was at $74.26, down 0.03% on the day.

Spot gold dropped 0.1% to $1,976.69 an ounce. U.S. gold futures fell 0.05% to $1,977.10 an ounce.

SYDNEY (Reuters) - Australia's independent wage-setting body said on Friday it would raise the minimum wage by 5.75% from July 1, as families grapple with soaring living costs.

The lowest-paid employees will receive A$22.61 ($15.34) an hour from July 1, according to Reuters calculations based on the current rate of A$21.38. The decision from the Fair Work Commission would affect more than 2 million workers.

"The level of wage increase we have determined is, we consider, the most that can reasonably be justified in the current economic circumstances," said the Commission in a statement.

"In our consideration, we have placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs."

Some economists have feared that a sizeable increase could set a benchmark for other wage expectations and complicate the Reserve Bank of Australia's job of returning inflation back to 2-3% target range.

So far, aggregate wage growth - which accelerated to a decade-high of 3.7% last quarter - has lagged forecasts, with Governor Philip Lowe warning of upside risks to wages from weak productivty growth, rather than nominal wages.

($1 = 1.4743 Australian dollars)

BUENOS AIRES (Reuters) - Argentina's central bank purchased $451 million of foreign currency on Wednesday to bolster its dwindling hard currency reserves, after daily sales from farm exports topped $1 billion, providing some relief for the country's hard-hit finances.

The currency move on Wednesday marks the biggest such purchase since late December.

In May, the central bank bought a total of $855 million, according to traders consulted by Reuters, the largest monthly purchase of greenbacks since last September.

The government has incentivized grains exports - Argentina's main source of dollars - in the last two months with a preferential exchange rate, helping bring in over $5 billion in total. That measure formally ended on Wednesday.

The South American country's prolonged economic slump has taken a toll on the bank's foreign currency reserves, which are needed to pay down debt as well as to finance many imports.

HONG KONG (Reuters) -Casino revenues in Macau, the world's biggest gambling hub, surged 366% from a year ago to total 15.6 billion patacas ($1.93 billion) in May, the highest since January 2020, when the COVID-19 pandemic had still to fully grip China.

The monthly take was bolstered by a five-day national holiday that saw hundreds of thousands of visitors flock to the special Chinese administrative region, which is the only place in China where citizens can legally gamble in casinos.

China lifted strict COVID-19 restrictions in January, allowing visitors to swarm into Macau for the first time in more than three years.

Around 500,000 people visited the former Portugues colony during the five day Labour Day holiday at the start of May, crowding onto its pastel coloured streets surrounding historical sights Senado Square and the Ruins of St Paul's and packing its glitzy casinos.

Authorities are keen to diversify sources of income in Macau, which depends on casinos for more than 80% of its government revenues, and have imposed strict new regulations on its six casino operators.

The rush of visitors comes as the densely populated territory grapples with an acute labour shortage, a key concern for casino operators Sands China (OTC:SCHYY), Wynn Macau (OTC:WYNMF), MGM China (OTC:MCHVY), SJM Holdings (OTC:SJMHF), Galaxy Entertainment and Melco Resorts.

Sands last week officially opened its "Londoner" casino resort which includes a 6,000 seat arena and attractions like a replica of London's Big Ben clock tower.

It was the first big casino opening since the COVID pandemic and was attended by former England football captain David Beckham who drew scores of fans to the property.

($1 = 8.0840 patacas)

By Kevin Buckland

TOKYO (Reuters) - Most Asia-Pacific stock markets rose on Thursday amid receding bets for a U.S. rate hike this month and relief over the passage of the U.S. debt ceiling bill through the House.

The dollar sagged to a one-week low versus the yen and hung close to Wednesday's more-than-two-month trough to the euro after Federal Reserve officials including Governor and vice chair nominee Philip Jefferson pointed to a rate hike "skip" at the June 13-14 policy meeting.

Treasury yields rose slightly from nearly two-week lows.

Crude oil prices edged off four-week lows following a surprise swing back to growth in a private survey of Chinese factory activity, with an OPEC+ meeting looming on the weekend.

MSCI's broadest index of Asia-Pacific shares gained 0.45%, rebounding after touching the lowest level since March 22 in the previous session.

Japan's Nikkei added 0.29%, while Hong Kong's Hang Seng gained 0.5% and mainland Chinese blue chips advanced 0.53%.

A divided House passed a bill to suspend the $31.4 trillion debt ceiling - and avert a catastrophic default - with majority support from both Democrats and Republicans, stoking optimism that it can move through the Senate before the weekend.

"This has gone through with a very big majority, so there's enough bipartisan support that it's very hard to believe this isn't going to be even more of a formality in the Senate," said Ray Attrill, head of foreign-exchange strategy at National Australia Bank (OTC:NABZY).

""What this does is it turns the attention to the incoming data and the Fed meeting this month," Attrill added.

Money markets currently lay about 38% odds for a hike on June 14, swinging back from about 70% earlier in the day, after some unexpectedly hot jobs numbers.

However, shortly after, the Fed's Jefferson said skipping a rate hike in two weeks would provide policymakers time to see more data before making a decision. Philadelphia Fed President Patrick Harker also said on Wednesday that for now he is inclined to support a "skip" in rate hikes.

The dollar was little changed at 139.435 yen after slipping to the lowest since May 25 at 138.96 earlier in the session.

The euro was flat at $1.06905. It sank as low as $1.0635 on Wednesday for the first time since March 20.

Benchmark 10-year U.S. Treasury yields edged up to 3.6655% in Tokyo, after dipping to 3.6140% overnight for the first time since May 18.

Brent crude futures for August delivery rose 46 cents, or 0.63% to $73.06 a barrel, while U.S. West Texas Intermediate crude (WTI) added 40 cents, or 0.59%, to $68.49 a barrel.

WASHINGTON (Reuters) - A majority of the U.S. House of Representatives voted on Wednesday to approve a bipartisan bill to suspend the government's $31.4 trillion debt ceiling, just five days before the deadline to avoid a crippling default.

Voting continued on the legislation, which must also be approved by the Democratic-majority Senate before President Joe Biden can sign the measure into law.

TAIPEI (Reuters) -Taiwan and the United States will sign the first deal under a new trade talks framework on Thursday, both governments said, boosting ties between the two at a time of heightened tensions with China over the democratically-governed island.

Taiwan and the United States started talks under what is called the U.S.-Taiwan Initiative on 21st Century Trade last August, after Washington excluded Taiwan from its larger pan-Asian trade initiative, the Indo-Pacific Economic Framework.

Taiwan's Office of Trade Negotiations said in a brief statement the first agreement under the framework would be signed in Washington on Thursday morning U.S. time, but gave no other details.

The U.S. Trade Representative's office said Deputy United States Trade Representative Sarah Bianchi would attend the event, but also did not elaborate.

Last month, the two sides reached agreement on the first part of their trade initiative, covering customs and border procedures, regulatory practices, and small business.

After the initial agreement is signed, negotiations will start on other, more complicated trade areas including agriculture, digital trade, labour and environmental standards, state-owned enterprises, and non-market policies and practices, the USTR has previously said.

The pact is not expected to alter goods tariffs, but proponents say it will strengthen economic bonds between the United States and Taiwan, open the island to more U.S. exports, and increase Taiwan's ability to resist economic coercion from China.

Beijing has denounced the trade talks as it does with all forms of high level engagement between Taiwan, which it claims as its own territory, and the United States.

Taiwan strongly rejects China's sovereignty claims, which Beijing has been trying to push on Taipei through repeated military activities including war games around the island.

By Lucy Craymer

WELLINGTON (Reuters) - New Zealand companies will start to benefit from the country’s new free trade agreement (FTA) with the United Kingdom with the pact now in force, the government said on Wednesday.

“The benefits which begin flowing from the FTA today, provide a further big boost to our economy,” said New Zealand Prime Minister Chris Hipkins a statement.

New Zealand forecasts the deal with its seventh-largest trading partner will add NZ$1 billion ($634.40 million) to GDP each year and save NZ$37 million in tariffs annually. The UK estimates the deal will add 800 million pounds to its GDP.

The agreement comes as London seeks to pivot towards the Indo-Pacific in light of its departure from the European Union. It has also signed a FTA with Australia.

“This is a major delivery milestone and sits alongside the seven new or upgraded FTAs secured since 2017, which is helping to contribute to record earnings for our exporters,” said Trade Minister Damien O'Connor.

Britain has also agreed with New Zealand to increase the age of eligibility for working holiday visas to 35 from 30, letting people stay for up to three years at a time.

($1 = 1.5763 New Zealand dollars)

By Ira Dugal

MUMBAI (Reuters) - On a hot summer afternoon, 23-year old Nizamudin Abdul Rahim Khan is playing cricket on a muddy, unpaved road in the Rafiq Nagar slum in India's financial capital, Mumbai.

Here, there is scant evidence of India's fast-growing economy. Bordering what was once Asia's largest garbage dumping ground, Rafiq Nagar and surrounding areas are home to an estimated 800,000 people, most living in tiny rooms across narrow, dark alleys.

The young men and women in the area struggle to find jobs or work, and they mostly dawdle the day away, said Naseem Jafar Ali, who works with an NGO in the area.

India's urban unemployment soared during the COVID-19 pandemic, reaching a high of 20.9% in the April-June 2020 quarter, while wages fell. While the unemployment rate has fallen since, fewer full-time jobs are available.

Economists say more and more job-seekers, especially the young, are looking for low-paid casual work or falling back on unreliable self-employment, even though the broader Indian economy is seen growing at a world-beating 6.5% in the financial year ending in March 2024.

India is overtaking China to become the world's most populous nation with over 1.4 billion people. Nearly 53% of them are under 30, its much-touted demographic dividend, but without jobs, tens of millions of young people are becoming a drag on the economy.

"Unemployment is only the tip of the iceberg. What remains hidden beneath is the serious crisis of underemployment and disguised unemployment," said Radhicka Kapoor, fellow at economic research agency ICRIER.

Khan for instance, offers himself as casual labour for home repairs or construction, earning just about 10,000 Indian rupees ($122) a month to help support his father and his four sisters. "If I get a permanent job, then there will be no problem," he says.

The risk for India is a vicious cycle for the economy. Falling employment and earnings undermine India’s chances to fuel the economic growth needed to create jobs for its young and growing population.

Economist Jayati Ghosh calls the country's demographic dividend "a ticking time-bomb."

"The fact that we have so many people who have been educated, have spent a lot of their own or family's money but are not being able to find the jobs they need, that's horrifying," she said.

"It's not just the question of potential loss to the economy...it is a lost generation."

SMALL BUSINESSES COLLAPSE

Unemployment is far more acute in India's cities, where the cost of living is high and there is no back-up in the form of a jobs guarantee programme which the government offers in rural areas. Still many in the army of rural unemployed flock to the cities to find jobs.

While urban unemployment was at 6.8% in the January-March quarter, the share of urban workers with full-time jobs has declined to 48.9% as of December 2022 from an already low 50.5% just before the start of the pandemic, government data shows.

This means that of the estimated urban workforce of about 150 million, only 73 million have full-time jobs.

For people in urban areas with full time jobs, average monthly wages, adjusted for inflation, stood at 17,507 rupees ($212) in the April-June 2022 quarter - the latest period for which government data is available.

This was a modest 1.2% higher than the October-December 2019 period, before the start of the pandemic.

But for the self-employed, incomes have fallen to 14,762 ($178.67) rupees in the April-June 2022 quarter, according to research by Ghosh and C.P. Chandrashekhar, both at the University of Massachusetts, Amherst. It was at 15,247 rupees in the October-December 2019 quarter.

"The big thing that has happened is the collapse of small businesses, which were the backbone of employment," said Ghosh.

Since the Indian government's decision to demonetise 86% of the country's currency in circulation in 2016, there have seen continuous attacks on the viability of small business, with the pandemic being the latest, she said.

Over 10,000 micro, small and medium enterprises shut in 2022-23 (April-March) alone, the government said in parliament in February. In the previous year, over 6,000 such units had shut. But the government did not specify whether any new enterprises were set up in those periods.

GRADUATE PAINTER

Many families in Khan's neighbourhood, typical of the urban sprawl in the city of 21 million, have been hit by job losses and lower incomes in recent years. Young workers are particularly vulnerable.

Arshad Ali Ansari, a 22-year-old student, said he saw his brother and sister lose their jobs soon after the start of the pandemic.

Sitting in a single-room with a kitchen attached, where his family of eight lives, Ansari said they survive on his 60-year old father's earnings of about 20,000 rupees a month.

His brother, who was a graduate and had worked in a bank, lost his job during the pandemic and had to join their father in painting houses.

"My brother had education, he had experience," Ansari said.

His sister, once a social worker, also lost her job and has given up hope of finding one.

India will need to create 70 million new jobs over the next ten years, wrote Pranjul Bhandari, chief India economist at HSBC, in a note earlier this month. But only 24 million will likely be created, leaving behind "46 million missing jobs."

"From that lens, a growth rate of 6.5% will solve a third of India’s jobs problem," Bhandari wrote.

(This story has been refiled to fix a typo in paragraph 2)

($ 1 = 82.62)