US jobs growth slows more than expected in October

NEW YORK (Reuters) – U.S. job growth slowed more than expected in October in part as strikes by the United Auto Workers (UAW) union against Detroit’s “Big Three” car makers depressed manufacturing payrolls, while wage inflation cooled, pointing to an easing in labor market conditions.

Nonfarm payrolls increased by 150,000 jobs last month, the Labor Department’s Bureau of Labor Statistics (BLS) said in its closely-watched employment report on Friday. Data for September was revised lower to show 297,000 jobs created instead of 336,000 as previously reported.

MARKET REACTION:

STOCKS: U.S. stock futures rose after the jobs data. BONDS: U.S. Treasury 10-year yield dropped to three-week low after the jobs report, last yield down at 4.543%.

FOREX: The fell 0.7% to 105.34 after the weaker-than-expected jobs report.

COMMENTS:

RONALD TEMPLE, CHIEF MARKET STRATEGIST, LAZARD, NEW YORK

“This is yet another piece of data that suggests the immaculate disinflation. From my view, the Fed rate hike cycle is over and this reaffirms the view that the Fed should not hike rates again. If you look at the new jobs, 150,000 versus 180,000 expected – that is still a strong jobs creation number but more in-line with what the U.S. economy needs relative to population growth and the stable unemployment rates. That is a goldilocks number. This seems like a really positive report from the Fed’s perspective.”

WILL COMPERNOLLE, MACRO STRATEGIST, FHN FINANCIAL, NEW YORK

“I think markets are pretty confident now that the Fed really is at the terminal rate and…that is the kind of the final nail in the coffin in terms of market pricing. I wouldn’t say that this one data report really says that the economy is slowing going into the fourth quarter, I think there is still a lot of hard economic data that says the economy’s strong, but this is certainly the labor market softening that I think the Fed has been expecting for a while.”

MATT PALAZZOLO, SENIOR INVESTMENT STRATEGIST, BERNSTEIN PRIVATE WEALTH MANAGEMENT, NEW YORK

“Overall the Fed is likely to breathe a sigh of relief this morning that we didn’t have another strong payrolls month like we did in September. For October overall, this was a softer report, softer than the consensus. In part, it reflects the auto workers strike but, still downward revisions to prior months and in-line wages should provide some comfort to both the stock and the bond market and we are seeing that so far.”

“From a policy perspective this gives confidence the Fed remains on hold for the foreseeable future and only really hikes again if growth or inflation accelerate from here. This, given the evidence both in this report and in recent reports – the ISM manufacturing for example – is becoming less likely.”

“Overall this month and prior revisions to previous months were softer than expected. So it goes beyond just the auto workers strike. To be clear, the labor market is still tight. Anytime we are adding more than 100,000 workers then the labor market is tightening. But absent a re-acceleration to meaningfully higher job gains, I think the Fed is comfortable.”

“Where we are from here is a steady deceleration in labor market gains and economic activity for the next six to nine months. That should be evidenced in labor market, retail sales and other key monthly high frequency data and that, provided it occurs, should allow for the Fed to stay on hold at current levels.”

“We think the economy will slow from the current pace. You know, we think GDP next year is going to be close to flat, maybe up 0.5%. So there is going to be a slowdown relative to 2023. If we have a recession, given the strong position that we’re coming in from today, the recession should be mild.”

BRYCE DOTY, SENIOR PORTFOLIO MANAGER, SIT INVESTMENT ASSOCIATES, MINNEAPOLIS, MINNESOTA

“While seemingly counter intuitive, weak jobs data is sparking a risk-on mentality. Today’s jobs data cements the much-needed relief from Fed rate increases. Credit spreads should continue to ratchet in and bond yields will come down as investors see it as now safe to pile into bonds.”

BRAD MCMILLAN, CHIEF INVESTMENT OFFICER for COMMONWEALTH FINANCIAL NETWORK, WALTHAM, MASSACHUSETTS

“As expected, this employment report came in lower than last month, and lower than expectations. To some extent this was already in the cards, and even at the lower current level, job growth is still reasonably healthy. But in fact, given the strikes in place, the actual numbers adjusted for the strikes are likely better than the report, which means that despite the slowdown, job growth remains healthy overall.”

“But although we are still in a reasonably good place, when you look at the details, we can see a continued slowdown. The unemployment rate, which is not affected by strikes, rose, and the average work week, which reflects overall labor demand, fell. Worse, the two-month payroll numbers were revised down materially. The real takeaway from this labor report is that while the market is still fairly healthy, the slowdown is real – and may be accelerating.”

“The good news here is that the slowdown will likely keep the Fed on the sidelines going forward. One of their key concerns has been an overheated economy, especially after last quarter’s GDP growth, and this suggests that problem is going away. Slower growth is still growth, and this jobs report is still in the sweet spot. We do see signs, however, that more weakness may be ahead.”

JAY HATFIELD, CHIEF EXECUTIVE OFFICER AT INFRASTRUCTURE CAPITAL MANAGEMENT, NEW YORK

“It is clearly a weak report. There was a revision to the last month as well. It is consistent with the views of the market that the job market and the economy is decelerating and that’s going to keep the Fed on hold and will cause central banks next year to cut rates.”

“Average hourly earnings were only 0.2% versus up 0.3%. That is super bullish for the Fed being on pause. Most market participants think the U.S. is going to avoid recession. They just didn’t want to see overheating growth and then more rate increases.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“The employment situation is still good, but no longer great. That’s not all bad. It could get worse, though. Only 52% of private industries reported job increases, which is way down from September’s 61.4%. There’s not a lot of breadth in the markets and there’s not a lot of breadth in the job gains anymore.”

“Wage growth is positive, but nothing too concerning from an inflation perspective. Job gains were decent even with the auto strikes. Back month revisions were substantial as the BLS has consistently overestimated job gains this year, unlike last year where they consistently underestimated the gains. It’s a world that’s good for bonds, but cloudy at best for equities.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The bottom line is this is a weak report although some of it might be attributed to the (UAW) strike. But hourly wages only grow by 0.2% and the participation rate came down to 62.7%.’

“This is a good sign that the labor market is weakening and is playing into the hands of the Fed. This should be bullish for equities.”

“It probably indicates another pause by the Fed in December, which would signal that the Fed is done raising rates.”

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