US jobs data shows broad cooling after run of surprise strength

US job growth slowed by more than expected and the unemployment rate rose to an almost two-year high of 3.9 per cent, indicating that employers’ strong demand for workers is beginning to cool.

Nonfarm payrolls increased by 150,000 in October following downwards revisions to the prior two months, a Bureau of Labour Statistics report showed on Friday. Monthly wage growth slowed.

The latest figures suggest some cracks are beginning to form in a jobs market that has been gradually normalising, thanks to an improvement in labour supply over the past year and a tempering in the pace of hiring.

The rise in the unemployment rate points to a pickup in layoffs – a development employers had so far broadly avoided. The survey of households showed a more than 200,000 increase in those who lost their job or completed a temporary one.

The S&P 500 opened higher, Treasuries rallied and the dollar weakened, as investors judged it more likely the Federal Reserve is finished with its run of interest rate rises.

Traders marked down chances of a rate increase in the coming months and predicted an earlier cut next year.

Health care and social assistance, as well as government, drove the payrolls gain.

Other categories, however, showed tepid growth or outright declines. Manufacturing payrolls fell by 35,000 in October, largely a reflection of the United Auto Workers union strike.

The hit will prove temporary though, given union members have since struck tentative deals with the nation’s largest car makers.

Looking ahead, sustained setbacks in the labour market – the bedrock of consumer spending and the broader economy – risk raising concerns about the nation’s ability to weather high interest rates without falling into recession.

“Today’s jobs report is consistent with both a mild loosening of the labour market on the way to a soft landing, and potentially the beginning of a more troubling downturn,” Nick Bunker, head of economic research at Indeed Hiring Lab, said in a note.

The figures come on the heels of the Fed’s decision to hold off on raising interest rates for a second consecutive meeting.

Chairman Jerome Powell hinted the central bank may be finished with rate increases, a decision that would be reinforced in the months ahead by a further easing in labour demand.