U.S. job growth slowed less than expected in October as the drag from a strike at General Motors was offset by gains elsewhere and hiring in the prior two months was stronger than previously estimated, offering some assurance that consumers would continue to support the slowing economy.
While the Labor Department’s closely watched monthly employment report on Friday showed the unemployment rate picking up from near a 50-year low of 3.5% last month, that was because of an influx into the labor force in a sign of confidence in jobs markets.
The report came on the heels of data this week showing a further slowdown in economic growth in the third quarter as a trade tensions-induced slump in business investment deepened.
Manufacturing’s struggles appear to have persisted early in the fourth quarter, with a survey on Friday showing a measure of factory activity remaining in contraction territory for the third straight month in October.
The Federal Reserve cut interest rates on Wednesday for the third time this year, but signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
“The current economic expansion looks set to continue at least through the first part of next year despite the trade war drag,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh. “Today’s solid jobs report means that the Fed, after cutting its policy rate three times since the summer, is likely to keep rates steady in the near term.”
Nonfarm payrolls increased by 128,000 jobs last month, with manufacturing shedding 36,000 positions - the most since October 2009, the government’s survey of establishments showed. Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike by about 46,000 workers at GM plants in Michigan and Kentucky ended last Friday.
Job growth last month was also held back by the departure of 20,000 temporary workers hired by the government for the 2020 Census. Excluding the strike and these temporary hires, economists estimate payrolls increased by about 190,000.
The economy created 95,000 more jobs in August and September than previously estimated. Economists polled by Reuters had forecast payrolls rising by only 89,000 jobs in October.
The dollar was little against a basket of currencies on the employment report, while U.S. Treasury prices fell. U.S. stocks were trading higher.
Job growth is slowing this year, averaging 167,000 per month compared with an average monthly gain of 223,000 in 2018, in part because of the nearly 16-month trade war between the United States and China, which has undermined business investment.
The U.S.-China trade war continues to cast a pall over the longest economic expansion, now in its 11th year.
The Institute for Supply Management (ISM) said its index of national factory activity rose to a reading of 48.3 last month from 47.8 in September, which was the lowest level since June 2009 when the recession was ending. A reading below 50 indicates contraction and October marked the third straight month that the index broke below the 50 threshold.
The index had declined for six straight months. Though the ISM’s forward-looking new orders sub-index increased last month, in remained in contraction territory. The survey’s factory employment index rose to 47.7 in October from 46.3 in September.