By Mark Shenk June 4 (Bloomberg) -- Crude oil tumbled after a government report showed that the U.S. added fewer jobs than forecast last month, bolstering concern that the economic recovery will slow. Oil slipped as much as 2.9 percent after the Labor Department said that payrolls rose by 431,000 in May. Economists projected a 536,000 gain, according to the median forecast in a Bloomberg News survey. Prices also dropped as the dollar surged to a four-year high against the euro, reducing the appeal of commodities as an alternative investment. “The employment number really had a negative impact on hopes of a strong economic rebound,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy. “The number was wildly below what was expected. There’s a direct correlation between employment and energy demand, especially gasoline.” Crude oil for July delivery declined $1.67, or 2.2 percent, to $72.94 a barrel at 10:07 a.m. on the New York Mercantile Exchange. Futures are down 1.4 percent this week. Gasoline for July delivery fell 4.73 cents, or 2.3 percent, to $2.0339 a gallon in New York. The government hired 411,000 temporary workers for the 2010 census, accounting for the bulk of the gain. Private payrolls rose a less-than-forecast 41,000. “The census was responsible for over 400,000 of the new jobs, which is a big disappointment,” said Michael Fitzpatrick, vice president of energy at MF Global in New York. “We need evidence of a sustained economic recovery to send oil higher.” Sovereign-Debt Crisis The dollar climbed against the euro on concern that Europe’s sovereign-debt crisis will spread. The greenback strengthened to $1.2042 per euro, up 1 percent from $1.2163 yesterday, after touching $1.2019, the highest since March 2006. “We were already under pressure before the report’s release because the news from Europe isn’t good,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser. “When the jobs number came out, just about every market took a hit.” The Standard & Poor’s 500 Index fell 1.6 percent to 1,084.83, and the Dow Jones Industrial Average slipped 181.68 points, or 1.8 percent, to 10,073.60. The Reuters/Jefferies CRB Index of 19 commodities declined 0.9 percent to 252.57. Brent crude for July settlement slipped $1.46, or 1.9 percent, to $73.95 a barrel on the London-based ICE Futures Europe exchange. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Source