WASHINGTON      -    US job growth slowed less than expected in October as the drag from a strike at General Motors (GM.N) was offset by gains elsewhere and hiring in the prior two months was stronger than previously estimated, offering some assurance that consumers would continue to support the slowing economy. While the Labor Department’s closely watched monthly employment report on Friday showed the unemployment rate rising from a near 50-year low of 3.5% last month, that was due to an influx into the labor force, a sign of confidence in the jobs markets. The report supported the Federal Reserve’s decision on Wednesday to cut interest rates for the third time this year and signal a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.

The longest economic expansion on record, now in its 11th year, is being largely restrained by an almost 16-month trade war between the United States and China, which has led to a contraction in business investment and manufacturing. “The expansion looks set to continue at least through the first part of next year despite the trade war drag,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh. “Today’s solid jobs report means that the Fed is likely to keep rates steady in the near term.” Nonfarm payrolls increased by 128,000 jobs last month, with manufacturing shedding 36,000 positions because of the strike - the most since October 2009, the government’s survey of establishments showed. Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike by about 46,000 workers at GM plants in Michigan and Kentucky ended last Friday.

Job growth in October was also held back by the release of 20,000 temporary workers hired by the government for the 2020 Census. Excluding the strike and Census temporary hires, economists estimate payrolls rose by about 190,000 last month.  Economists polled by Reuters had forecast payrolls rising by only 89,000 jobs in October. The economy created 95,000 more jobs in August and September than previously estimated. Manufacturing continues to loom large over the labor market and overall economy, with a survey from the Institute for Supply Management (ISM) on Friday showing factory activity firmly stuck in recession in October.

“The longer the drag from the manufacturing recession goes on it will increasingly weigh on service sector businesses and the health of the overall labor market,” said Scott Anderson, chief economist at Bank of the West in San Francisco. The White House on Friday struck an optimistic note on trade negotiations, with economic adviser Larry Kudlow saying Washington was still aiming to sign an initial deal this month.

U.S. stocks rose on the payrolls data and trade hopes, with the Nasdaq .IXIC and benchmark S&P 500 .SPX hitting record highs. The dollar dipped against a basket of currencies. U.S. Treasury prices fell.  Job growth has slowed this year, averaging 167,000 per month compared with an average monthly gain of 223,000 in 2018, in part because of the U.S-China trade spat, ebbing demand and a shortage of workers.

The ISM said its index of national factory activity rose to a reading of 48.3 last month from 47.8 in September, which was the lowest level since June 2009. A reading below 50 indicates contraction in manufacturing, which accounts for 11% of the economy.  October marked the third straight month the index was below the 50 threshold. The index had declined for six straight months. Though the ISM’s new orders and factory employment measures rose, they remained mired in contraction territory. There are fears the business investment malaise could spill over to the labor market, which is underpinning consumer spending. Fed Chair Jerome Powell on Wednesday said he did not see this risk as the labor market remains healthy. Others agreed, citing the stock market gains.