US jobs growth slows more than forecast in October

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Jobs growth in the US slowed sharply in October, according to figures that signalled that the world’s largest economy is starting to cool and 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 a rally this week in US Treasuries, as investors bet that the slowdown in the labour market made it more likely that the US Federal Reserve will not raise rates further in coming months.

“This jobs report is . . . helping convince non-believers that this is very much the end of the rate hike cycle,” said Kristina Hooper, chief global markets strategist at Invesco. “We are very much in a disinflationary trend, the economy is cooling and the Fed does not have to hike rates again.”

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 US 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 monitor 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 in line 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 it 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.

Bond markets began this week’s rally after Wednesday’s Fed meeting, bringing about the biggest two-day fall in 10-year Treasury yields since the US banking crisis of early March.

Investors highlighted remarks by Fed chief Jay Powell that the central bank was “proceeding carefully” with future rate rises, which some took as a sign that borrowing costs have already succeeded in slowing down the US economy.