The October jobs report showed that hiring downshifted, as private employers added 99,000 payroll positions. The unemployment rate ticked up to the highest level since January 2022, while wage growth was tepid. The S&P 500 opened solidly higher in early Friday stock market action, after the strongest four-day rally in nearly a year.
Jobs Report Hits And Misses
The 150,000 overall employment gain undershot Wall Street's 179,000 forecast. Private-sector hiring missed estimates of 143,000. Meanwhile, government payrolls rose by 51,000.
The hiring numbers somewhat understate labor market strength. The Labor Department has said about 30,000 auto workers were off the job when the data was collected before resolution of the United Auto Workers strike at Ford, General Motors and Stellantis.
Hiring gains in August and September were revised down by a combined 62,000 jobs. September's initially reported gain of 336,000 jobs was revised to 297,000.
Private-sector hiring has averaged 153,000 over the past three months. Without the auto strike, that would have been about 163,000 per month. The trend continues to moderate, but it's still pretty solid.
The unemployment rate rose to 3.9% from 3.8%. Economists expected no change.
Wage Growth, Work Hours Also Point To Softer Labor Market
The average hourly wage rose 0.2% on the month, below 0.3% forecasts. However, annual wage growth of 4.1% came in above 4% expectations amid revisions to prior data.
Still, the 3.2% annualized wage growth over the past three months is consistent with the Fed's 2% inflation target. That's especially the case if productivity growth is on the rise, as seems to be the case.
Amid softer hiring and tame wage growth, employees also clocked fewer hours, another indication of easing labor demand. The average workweek slipped to 34.3 hours from 34.4 hours, continuing the recent downtrend. That implies essentially no growth in aggregate incomes in October, a clear negative for consumer spending.
Household Survey
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
As soft as the employer survey was, the household survey pointed to outright weakness, though the data can be volatile and comes with a greater margin of error.
Household survey data showed the ranks of the employed falling by 348,000. The number of unemployed workers grew by 146,000 as 201,000 people exited the labor force.
The labor force participation rate, a measure of those working or actively seeking work as a share of the 16-and-up population, dipped to 62.7% from 62.8%.
This week's strong S&P 500 rally took flight on Wednesday as Federal Reserve chair Jerome Powell talked up a better-balanced job market amid a boom in labor force participation, which he attributed partly to a return to pre-pandemic immigration trends.
Labor Department data shows the labor force, meaning those working or looking for work, has grown by 3.3 million over the year through September. That's helped to moderate wage growth, as the supply of workers increases and job openings decline.
S&P 500, 10-Year Treasury Yield
The S&P 500 opened up 0.6% after release of the jobs report. That follows the sharpest four-session gain since mid-November 2022.
The S&P 500 has rallied 4.9%, capped off by Thursday's 1.9% advance. That's lifted the S&P 500 back nearly to its 50-day moving average.
On Thursday, the S&P 500 staged a follow-through day, confirming its new market rally. That came a day after the Nasdaq's own follow-through day.
Meanwhile, the 10-year Treasury yield has tumbled more than 20 basis points in the past two days. After knocking on the door of 5% the past couple of weeks, the 10-year bond yield fell back to 4.67% on Thursday.
Early Friday, the 10-year Treasury yield tumbled to 4.51%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
Fed Rate Hike Odds
Friday's data certainly reduces the risk that markets are ignoring part of Fed chief Powell's message on Wednesday. He indicated that tightening financial conditions — due to a higher 10-year Treasury yield, stronger dollar and lower S&P 500 — may avert the need for an additional hike in the Fed's key short-term interest rate. But Powell said that would only be the case if financial conditions remain persistently tight.
For now, markets seem to think that tighter financial conditions aren't going to be necessary to bring down inflation.
On Friday morning, odds of a rate hike at the Fed's Dec. 13 policy update dived to 10% from 20% on Thursday. Odds of a hike by the Jan. 31 meeting tumbled to 15% from 28%. In facts, odds are now tilting toward a rate cut by the May 1 meeting.
More Jobs Report Details
Health care and social assistance employers accounted for the bulk of the hiring, adding 77,200 jobs.
Leisure and hospitality sector employment rose by 19,000. Retailers added 700 workers.
Construction jobs rose by 23,000.
Manufacturers shed 35,000 jobs, including a strike-related fall of 33,000 for motor vehicles and auto parts.
