The US labour market slowed sharply in October, suggesting that the Federal Reserve is likely to remain on hold through the early part of next year. According to data released by the Bureau of Labor Statistics this morning, just 150,000 jobs were added, down from a revised 297,000 in September, and the unemployment rate crept higher to 3.9 percent. Average hourly earnings rose 0.2 percent month-over-month, modestly below expectations. Ahead of the release, “whisper number” estimates had forecast a 200,000-job gain and the unemployment rate was seen holding at 3.8 percent.

The dollar is weakening, equity futures are pushing higher, and yields are plummeting as traders eliminate remaining odds on an additional rate hike this year and move to price in a more aggressive monetary accommodation process in 2024. The two-year Treasury is yielding 4.88 percent as we go to print, down from 5 percent earlier in the session, and the ten-year is at 5.56 percent.

Looking in the rear-view mirror, September’s upside surprise appears to have been an aberration, but October’s print looks equally distorted – strike activity, which directly impacted 35,000 jobs, and indirectly took a toll on others, might have artificially lowered the headline print.

On the colder side of the 49th Parallel, Canada added 17,500 jobs in October, down from the 63,800-job gain reported in the prior month, and the number of full-time roles shrank by 3,300 as labour market loosened in line with weakening economic fundamentals in other areas of the economy. 20,800 part-time positions were created, and the unemployment rate jumped to a 21-month high at 5.7 percent. Economists had expected a circa-20,000-job gain, with unemployment rising to 5.6 percent.

Growth in average hourly wages slowed to 5 percent on a year-over-year basis – still above the Bank of Canada’s comfort zone – following an increase of 5.3 percent in September.

The Canadian dollar is climbing as weakness in the greenback lifts global exchange rates. With borrowing costs easing in line with the drop in US yields, the Canadian economy could see some relief in coming months – but we suspect the damage already inflicted could prove painful enough to push the economy into a downturn anyway.