Cooling job market a 'promising sign' for Fed, Vanguard economist says

A soft jobs report for October — on the heels of a blockbuster September — is a "promising sign" for the Federal Reserve, said Andrew Patterson, senior international economist at Vanguard.

"Wages cooled and, even accounting for the impact of auto strikes, the pace of jobs being added appears to be cooling relative to the beginning of the year," he said. "The Fed will want to see more evidence that this labor market cooling represents a trend before they make a decision on any policy changes in December."

Vanguard has $7.8 trillion in assets under management.

Mohamed A. El-Erian, chief economic adviser at Allianz, posted on X, the social platform once known as Twitter, that the October jobs data is consistent with a "soft landing" for the economy and will likely boost both stocks and bonds in the near-term. Allianz has €520 billion ($550.9 billion) in assets under management, according to the firm's website.

The U.S. economy created 150,000 jobs in October, below expectations, and well below September's downwardly revised figure of 297,000, the U.S. Bureau of Labor Statistics reported on Nov. 3.

The unemployment rate edged up to 3.9%.

Economists had expected an increase of 189,000 jobs in October with the jobless rate at 3.8%, according to a survey by FactSet Research Systems, a financial data firm.

The August jobs figure was also downwardly revised to 165,000, and as a result, employment numbers in August and September combined were 101,000 lower than previously reported.

Over the past 12 months, the U.S. economy has added an average of 258,000 jobs per month, the Bureau noted.

In October, job gains were significant in the healthcare, government and social assistance sectors, while employment in manufacturing declined due to strike activity, the Bureau added in the release.

As of the morning of Nov. 3, according to CME Group's FedWatch tool, market participants' pricing of fed fund futures indicated there is a 90.2% probability that the central bank will again keep rates unchanged at the next meeting on Dec. 13, and only a 9.8% chance it will hike rates by 25 basis points.

The Fed's key short-term interest rate is currently in a range of between 5.25% to 5.5%, after the central bank elected to hold rates steady at the Nov. 2 meeting.

Alexandra Wilson-Elizondo, deputy chief investment officer of multiasset solutions at Goldman Sachs Asset Management, said the soft jobs report should validate the view that the hiking cycle is over.

"We believe the recession is delayed for now as fiscal policy continues to do the heavy lifting," she said. "The probabilities of a soft landing have increased."

GSAM has $2.7 trillion in assets under supervision.