According to the latest data from the US Bureau of Labour Statistics, the US unemployment rate rose 0.1 percentage points to 3.9 per cent in October.
This was despite approximately 150,000 Americans entering the job market, albeit well below consensus expectations of 180,000.
The labour participation rate also fell, down from 62.8 per cent to 62.7 per cent.
Signs of further weakness in the labour market follow the Federal Reserve’s latest monetary policy decision, with the Federal Open Market Committee (FOMC) opting to leave the funds rate on hold at 5.25–5.5 per cent for the second consecutive meeting.
According to ANZ Research, the latest labour market print supports its expectations for no further hikes to the funds rate during this tightening cycle, given the full impact of its 525 bps in cumulative increases are yet to filter through the economy.
“We anticipate these trends will continue given the Fed’s policy rate is restrictive which supports our view it has hiked for the last time in this cycle,” ANZ Research observed.
However, the Fed did not rule out further increases to interest rates in its post-meeting statement.
“The committee will continue to assess additional information and its implications for monetary policy,” the FOMC members noted.
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 per cent over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
“…In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook.”
But for American Century Investments’ co-chief investment officer – global fixed income, Charles Tan, movements in the bond markets would restrain the Fed.
“While the Fed left its future policy options open, the central bank’s tightening campaign is likely over,” he said.
“With Treasury yields soaring recently to 16-year highs, the bond market is doing its part, alongside the Fed, to tighten financial conditions.”
US equities rallied in response to the softer than anticipated labour market print, with the Dow Jones index closing 222 points (0.66 per cent) higher on Friday (3 November).
The index rose 4.68 per cent over the past week, with much of the growth recorded following the FOMC meeting last Wednesday (1 November).
The NASDAQ index rose 5.71 per cent over the same period, recovering lost ground over the second half of October.
Australian equities have mirrored the rebound in the United States, with the All Ordinaries Index rising 3.44 per cent over the past week.
However, Australian shares remain subdued in the year-to-date, up just 0.8 per cent.