(Bloomberg) -- US job growth slowed in October by more than expected and the unemployment rate rose to an almost two-year high of 3.9%, indicating that employers' strong demand for workers is beginning to cool.
Nonfarm payrolls increased 150,000 last month following a downwardly revised 297,000 in September, a Bureau of Labor Statistics report showed Friday. Monthly wage growth slowed.
The latest figures suggest some cracks are beginning to form in a jobs market that has been gradually normalizing thanks to an improvement in labor supply over the past year and a tempering of demand for workers.
Stock futures and Treasuries rallied after the report, while the dollar weakened. Traders marked down chances of a Federal Reserve interest-rate hike in coming months.
The rise in unemployment suggests a pickup in layoffs — a development employers had so far broadly avoided. The survey of households showed a more than 200,000 increase in those who lost their job or completed a temporary one.
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Health care and social assistance, as well as government, drove the payrolls gain. Other categories, however, showed tepid growth or outright declines. Manufacturing payrolls fell by 35,000 in October, largely a reflection of the United Auto Workers union strike. The hit will prove temporary though, given union members have since struck tentative deals with the nation's largest automakers.
Looking ahead, sustained setbacks in the labor market — the bedrock of consumer spending and the broader economy — risk raising concerns about the nation's ability to weather high interest rates without falling into recession.
The figures come on the heels of the Fed's decision to hold off on raising interest rates for a second straight meeting. Chair Jerome Powell hinted the central bank may be finished with rate hikes, a decision that would be reinforced in the months ahead by a further easing in labor demand.
Read More: Powell Hints Fed Is Done With Hikes in Pivot Cheered by Markets
Average hourly earnings rose 0.2% last month and were up 4.1% from a year earlier, the smallest annual advance since mid-2021. Earnings for nonsupervisory employees, who make up the majority of workers, increased 0.3% for a second month.
In a departure from the recent trend, the supply of labor declined, prompting a drop in the participation rate — the share of the population that is working or looking for work — to 62.7%. For those ages 25-54, participation decreased to a six-month low, driven by men.
--With assistance from Kristy Scheuble and Augusta Saraiva.
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