United States: slowdown in hiring in October calls for an end to rate hikes

The employment and unemployment figures in the United States published this Friday by the Labor Department confirm the sudden optimism of the markets: the slowdown in hiring observed in October should encourage the Federal Reserve not to raise its key rate next month. The unemployment rate rose in October to its highest level in almost two years, at 3.9%, while net job creation was only 150,000 units, almost half as much as in September.

Other good news, from the point of view of the bond market: the high job creation figures for September are revised downwards to 297,000 units, against 336,000 initially estimated. In addition, average hourly earnings only increase by 0.2% and not 0.3%. This brings their increase to 4.1% over the last twelve months. The trend, if confirmed, is in line with the Fed's hopes. Jerome Powell and his colleagues are banking on a cooling of the labor market to ease inflationary pressures, particularly those arising from sharp wage increases.

However, the strike in October at GM, Ford and Stellantis, and its effects on the numerous suppliers of these manufacturers, may have exaggerated the slowdown in hiring. The Labor Department notes in particular a reduction of 35,000 jobs in the manufacturing sector in October which probably reflects this social movement. A catch-up in November is likely, now that work is resuming on the forty affected sites.

American bond yields fell sharply following the publication of this news, while American equity markets confirmed at the opening their good direction from the day before. The dollar, on the other hand, suffered from the prospect of an end to the Fed's rate hikes, which clearly benefited the euro.