* Markets slide on jobs data, regain a little on ISM
* S&P 500, oil down but off early lows
* Dollar tumbles vs yen, Swiss franc; euro at 1-month high (Updates market activity and reaction after ISM data)
By Barani Krishnan
NEW YORK, June 3 (Reuters) - Global stocks and oil prices slid on Friday after U.S. jobs growth for May came in way below market expectations, heightening worries that the world's largest economy is in a protracted slowdown.
However, a report showing encouraging expansion in the U.S. services sector, one of the few bright spots in a week inundated with gloomy data, helped to trim losses.
Wall Street's benchmark S&P 500 index <.SPX> was down slightly more than half a percent, after earlier hitting a six-week low.
The dollar tumbled against the yen and Swiss franc, traditionally seen as the currency market's safe havens, after the government's monthly labor report showed the U.S. economy adding the smallest number of jobs since September.
"This highly disappointing report is a real shocker," said Mohamed El-Erian, co-chief investment officer at Pimco, the largest U.S. bond manager, in Newport Beach. California.
"It confirms that America has an unemployment crisis that involves worrisome economic, political and social dimensions. It speaks to a large unemployment problem that is becoming increasingly structural, and therefore protracted, in nature."
Global stocks, measured by MSCI's world equity index <.MIWD00000PUS>, fell 0.2 percent. European shares <.FTEU3> were also down about 0.2 percent, retreating from an earlier loss of 1 percent.
U.S. crude oil
While some fund managers brooded over the depressing jobs report, others wondered whether the Federal Reserve will send more cheap money their way to support markets in these difficult times.
"It doesn't matter what the reality is, it matters what the perception is, and the perception is that QE3 will at least be debated again instead of being tossed on the fire," said Dennis Gartman, author of a markets commentary letter.
The Fed's $600 billion bond-buying program, known as QE2, ends later this month. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on key economic and cyclical indicators
http://r.reuters.com/pad89r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The Labor Department said the U.S. jobless rate rose to 9.1 percent in May as high energy prices and the effects of Japan's earthquake bogged down the economy.
Closely watched nonfarm payrolls increased 54,000 last month. Private employment rose 83,000, the smallest amount since June, while government payrolls dropped 29,000.
Economists polled by Reuters had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May. The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated.
In a separate report, the Institute of Supply Management said the U.S. services sector picked up modestly in May after a sharp drop in the previous month. [ID:nN03252131]
The Dow Jones industrial average <.DJI> was down 93.09 points, or 0.76 percent, at 12,155.46. The Standard & Poor's 500 Index <.SPX> was down 9.43 points, or 0.72 percent, at 1,303.51. The Nasdaq Composite Index <.IXIC> was down 22.53 points, or 0.81 percent, at 2,750.78.
The benchmark 10-year U.S. Treasury note
Ten-year Treasury yields fell below 3 percent this week, the first time since December, as investors became wary about the near-term economic outlook.
The euro rose to a fresh one-month high against the dollar after Greece said the European Union's and International Monetary Fund's inspection of the country ended positively. The single currency climbed as high as $1.45530