The October jobs report showed that payroll gains nearly ground to a halt, far worse than expected, amid the ongoing Boeing strike and a hit from Hurricane Milton. Unemployment moved higher, but not enough to lift the jobless rate. After the jobs report, the S&P 500 rose solidly as markets priced in a greater odds of additional Federal Reserve rate cuts.

Job gains for August and September were revised sharply lower, supporting the case for further Fed easing.

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This Is How The Jobs Report Data Influences The Fed And Interest Rates

Jobs Report Hits And Misses

The 12,000 overall employment badly undershot economists’ 125,000 forecast, according to Econoday. Private-sector employers cut 28,000 jobs vs. expectations of a 90,000 payroll gain. Government jobs rose by 40,000.

Hiring gains in August and September were revised down by 112,000 jobs.

Average hourly earnings rose 0.4% in October, above 0.3% estimates. Twelve-month wage growth of 4% met forecasts. Economists cautioned that Milton’s hit to lower-wage work could have the effect of boosting average hourly pay.

Ahead of the report, some Wall economists predicted that the Boeing (BA) strike and its impact on contractors would lower net job gains by 40,000 to 45,000. Hurricane Milton was estimated to reduce employment by another 25,000 jobs, with a large margin of error. However, Fed Gov. Christopher Waller said recently that strikes and hurricanes may have reduced payrolls by more than 100,000.

The Bureau of Labor Statistics noted that its collection rate was “well below average” for the establishment survey that yields monthly payroll gains, which may have affected its accuracy.

Household Survey

The headline job and wage figures come from the Labor Department’s monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.

The unemployment rate held at 4.1%, as expected. That came as the ranks of the employed shrank by 368,000, outstripping the 220,000 decline in labor force participation. As a result, the ranks of the unemployed rose by 150,000.

On an unrounded basis, the unemployment rate rose to 4.14% from 4.05%.

More Jobs Report Details

Health care and social assistance employment rose by 51,300.

On the downside, leisure and hospitality employment fell by 4,000. Factory employment shrank by 46,000. Retailers cut 6,400 jobs. Temporary help services shed 48,500 jobs.

Still, a diffusion index measuring the breadth of hiring across industries only fell to 55.6 in October from 59.8 in September. Numbers above 50 mean that more industries are firing than hiring. The diffusion index stood at 56.6 a year ago.

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Wall Street Reacts To Jobs Report

“The muted rise in October payrolls is not merely due to strikes and the recent hurricanes,” wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “The slowing underlying trend, driven by tight monetary policy, also looks more pronounced after the huge downward revisions to August and September payrolls.”

“Perhaps more important than October’s muddled data are the revisions to prior months,” which bolster the case for a Fed cut in December as well as next week, wrote David Royal, chief financial and investment officer at Thrivent.

Fed Rate Cut Outlook

After the October jobs report, markets are pricing in 100% odds of a quarter-point rate cut at the Nov. 7 Fed meeting, up from 95% on Thursday, according to CME Group’s FedWatch page. Markets now see 83% odds of a further 25-basis-point rate cut at the Dec. 18 Fed meeting, up from 75%.

S&P 500

The S&P 500 rose 0.7% in early Friday morning stock market action after the jobs report. The 10-year Treasury yield slipped two basis points to 4.26%.

On Thursday, the S&P 500 closed out October on a down note, falling 1.9% on the session to snap a five-month winning streak.

That left the S&P 500 2.7% below its all-time closing high hit on Oct. 18, but still up 19.6% for the year.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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