Jobs Report: October Hiring Slows to 125K, Wage Growth Cools to 3.5% — Fed Hike Odds Drop

U.S. employers added 125,000 jobs in October, the Bureau of Labor Statistics said Friday, undershooting the 140,000 consensus and marking the slowest monthly pace since April. The unemployment rate ticked up to 4.3% from 4.2%, while the participation rate held at 62.6%.

Wages provided the more consequential signal. Average hourly earnings rose 0.2% on the month and 3.5% from a year earlier, the slowest annual pace since early 2023. Together with September's soft 0.3% personal-income gain, the report paints a labour market that is cooling at exactly the pace the Federal Reserve said it wanted to see — before the energy shock complicated the arithmetic.

Rate markets moved immediately. Fed funds futures repriced the probability of a 25-basis-point December increase to roughly 68%, down from 78% before the release. Two-year Treasury yields fell seven basis points to 3.64%, and the curve steepened as the long end held firmer on term-premium grounds.

"This is the report that gives the doves their argument," said Laura Nkemdirim, senior rates strategist at Ashfield Partners. "Headline inflation is still 3.1% on the PCE gauge, but the employment side of the mandate is no longer printing hawkish surprises. The December decision is genuinely live in both directions."

Wall Street read the print as a soft-landing data point. The S&P 500 added 0.7%, the Nasdaq Composite rose 1.0% as rate-sensitive technology rebounded from Thursday's PCE selloff, and the equal-weight index lagged as energy gave back part of its weekly gain.

Europe had already closed into the release. The Stoxx 600 ended 0.3% higher, with French sovereign spreads tightening three basis points after a turbulent week in which the 10-year OAT touched 4.89%. German two-year Schatz yields eased four basis points as traders trimmed bets on a more hawkish European Central Bank follow-through at the December meeting.

The deeper question is whether a cooling labour market can coexist with energy-driven headline inflation at 3.7% on the CPI. For now the FOMC is still framing December as data-dependent: a soft November payrolls print on December 4 would likely finish the job for the doves, while another hot inflation reading between now and then would put the hike back in play.