US job growth strong in October, but cracks emerging

US job growth increased more than expected in October, but the pace is slowing and the unemployment rate rose to 3.7 percent, suggesting some loosening in labour market conditions, which would allow the Federal Reserve to shift towards smaller interest rates increases starting in December.

The Department of Labor’s closely watched unemployment report on Friday also showed annual wages increasing at their slowest pace in just more than a year last month. Household employment decreased and the employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, for prime-age workers fell by the most in 2.5 years.

“The foundation of the labour market strength story fades a little when you pull back the tarp and look more closely at the details,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The report to us looks like payroll jobs growth will falter in coming months as companies batten down the hatches as the Fed continues to take away the economy’s punch.”