Market Wire: US Payrolls Reflect Temporary Dislocations

The US employment engine slowed sharply in October, but the impact on markets looks relatively modest thus far, given that investors had been braced for a weaker payrolls report, with hurricane-related effects widely expected to combine with the ongoing Boeing strike to bring job-creation rates down.

According to data just released by the Bureau of Labor Statistics, just 12,000 jobs were added in the month - representing an undershoot relative to the 100,000-consensus forecast - but the unemployment rate held at 4.1 percent, and the labour force participation rate inched only slightly lower, suggesting that labour market internals remained relatively solid.

September’s number was revised lower to a still-astonishingly-hot 223,000 from the 254,000 previously estimated.

Wage gains remained remarkably strong, pointing to continued gains in worker bargaining power. Average hourly earnings climbed 0.4 percent month-over-month, holding at the pace set in the prior month, and were up 4 percent year-over-year.

Statisticians noted "It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events”, and acknowledged the impact the Boeing strike likely had on employment levels, saying “Manufacturing employment decreased by 46,000 in October, reflecting a decline of 44,000 in transportation equipment manufacturing that was largely due to strike activity”.

The dollar is slipping and Treasury yields are inching down across the front of the curve as traders bolster already near-certain wagers on a move at next week’s Federal Reserve meeting and prepare for a slightly more aggressive easing trajectory in the months to come - but this could be unwound in the coming hours as investors hedge their bets ahead of Tuesday’s presidential election. The greenback’s underlying momentum still looks fairly unstoppable.