US jobs growth slows more than forecast in October

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Jobs growth in the US slowed sharply in October, according to official figures that signalled that the world’s largest economy is starting to cool and which reignited a rally in US government bonds.

US employers created 150,000 new posts last month — less than forecast — and barely half of September’s revised figure of 297,000. Economists surveyed by Bloomberg had expected a total of 180,000 new jobs for October.

The figures provided further fuel for this week’s rally in US Treasuries, as investors bet that the slowdown in the labour market made it more likely that the US Federal Reserve has reached the end of its rate-rising cycle.

The yield on the two-year Treasury note, which moves inversely to price and tracks interest rate expectations, fell to a two-month low of 4.85 per cent.

After the data release, traders fully priced in a rate cut in June last year, compared with their previous expectations of a cut in July.

According to the Bureau of Labor Statistics data the unemployment rate rose to 3.9 per cent in October, from 3.8 per cent in September. Average earnings edged 0.2 per cent higher, a slight slowdown from the 0.3 per cent increase in the previous month.

In a further revision, job gains in August were revised lower by 62,000 to 165,000.

Jobs growth is an important indicator for investors and Fed rate-setters, who are monitoring the labour market for evidence that the central bank’s monetary policy tightening campaign is cooling the economy.

After Friday’s data release, the yield on the 10-year Treasury note, which moves with growth expectations, fell to its lowest level since mid-October, down 0.12 percentage point to 4.55 per cent.

Futures tracking the S&P 500 rose 0.5 per cent ahead of Wall Street’s opening bell.

The Fed has raised interest rates from near zero in March last year to a target range of 5.25 to 5.5 per cent in an effort to bring down inflation.

But recent data — including previous jobs figures — has indicated that the economy is more resilient than had previously been thought. Inflation was also slightly higher than forecast for September, while gross domestic product expanded faster than expected in the third quarter.

The Fed held interest rates steady on Wednesday and along with other central banks is widely expected to keep borrowing costs at current levels for some time.

Financial markets have increasingly priced in bets that the Fed will hold off further rate increases, with officials shifting the debate towards how long to keep them high.