The U.S. economy added fewer-than-expected new jobs last month as the impact of the United Auto Workers strike and a slowdown in hiring bumped the headline unemployment rate to the highest level of the year.
The Labor Department's Bureau of Labor Statistics said 150,000 jobs were created in October, a marked retreated from the downwardly revised total of 297,000 recorded in September and the three-month average of 266,000. Economists were looking for a headline total of 180,000.
Average hourly earnings were up just 0.2% from the previous month, the lowest since February 2022, while the year-on-year gain was pegged at 4.1%, modestly ahead of the Wall Street consensus forecast but still the slowest pace for 2023.
The headline unemployment rate, meanwhile, nudged to 3.9% from 3.8%, marking the highest level of the year. That level could support the Federal Reserve's position that a notable labor-market slowdown is likely required for it to return inflation to its 2% target and declare the end of its rate hiking cycle.
Another wrinkle for this month's report is the impact of the United Auto Workers union's 45-day strike against the Big 3 carmakers, which ended earlier this week.
The BLS has said that around 30,000 UAW workers were off the job when it conducted its survey last month. Such a figure could exaggerate declines in the manufacturing portion of the October reading, while flattering gains for November.
“Today’s labor market is in tune with the changing of the seasons. Macro-economic risks are coming and going, yet the October jobs report shows signs of chilling but steady gains that were clearly clouded by strikes across the economy," said Glassdoor’s Chief Economist Aaron Terrazas.
"While businesses continue to hire, employees and investors are still hesitant about the future ahead," he added.
The S&P 500, which is one pace for its best week of the year, was marked 50 points, or 1.17%, higher in early afternoon trading following the jobs data release while the Dow Jones Industrial Average indicating a 280 point advance. The tech-focused Nasdaq was marked 193 points, or 1.46%, higher.
Benchmark 10-year Treasury note yields were marked 10 basis points [0.1 percentage point] lower at 4.546%, extending the paper's three-day decline to around 48 basis points. Two-year notes were pegged 8 basis points lower at 4.875%.
Data-dependent Fed keeps rate-hike options open
The now data-dependent Fed, which is keeping its options open on potential rate hikes over the next two meetings in December and January, will be keenly focused on jobs and inflation releases over the coming weeks.
Related: Fed holds rates steady, hints at more increases but markets see end of hiking cycle
"We remain committed to bringing inflation back down to our 2% goal and to keeping longer-term inflation expectations well anchored," Fed Chairman Jerome Powell said Wednesday. "Reducing inflation is likely to require a period of below-potential growth and some softening of labor market conditions."
Data from earlier this week, however, seem to suggest only a modest cooling in the broader labor market.
ADP's National Employment report showed a weaker-than-expected addition of 113,000 private-sector jobs last month. It noted that workers remaining in their roles saw the smallest year-over-year pay increase, at 5.7%, since October 2021.
“In all, October's numbers paint a well-rounded jobs picture. And while the labor market has slowed, it's still enough to support strong consumer spending," said ADP's chief economist, Nela Richardson.
Weekly applications for new jobless benefits, meanwhile, have crept modestly higher, to a four-week average of 210,000, according to the Labor Department's most-recent tally.
Layoffs, however, appear to have slowed, with Challenger Gray reporting 36,836 announced job cuts over the month of October, down from more than 47,000 in September.
The BLS noted in its September Job Openings and Labor Turnover report Tuesday that around 9.55 million positions went unfilled in September, suggesting demand for new hires remains elevated into the autumn months.
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