By Davide Barbuscia

U.S. Treasury yields fell on Thursday due to concerns over a weakening U.S. labor market as well as the prospect of more economic uncertainty caused by the government shutdown in Washington and questions over the legality of President Donald Trump’s tariffs.

The U.S. government shutdown, the longest on record, has forced investors to rely on private data in place of the Bureau of Labor Statistics’ monthly jobs report, which was due on Friday but has been frozen by the shutdown. On Thursday, a batch of private labor indicators pointed to a weakening economy, driving Treasury yields lower and boosting expectations for Federal Reserve interest rate cuts.

U.S. employers announced 153,074 job cuts in October, global outplacement firm Challenger, Gray & Christmas said on Thursday. That represented a 183% surge and the highest October total in 22 years, as companies slashed costs and embraced artificial intelligence, signaling a potential shift toward more firings.

The Revelio Public Labor Statistics, a privately compiled indicator of the labor market, showed the U.S. economy lost 9,000 jobs in October, predominantly driven by employment losses in the government sector. The Chicago Fed meanwhile estimated the U.S. jobless rate likely inched up to 4.4% in October, a four-year high, as hiring slowed and layoffs rose.

“Given the fact that the jobs market has been in a little bit of a lull here, dating back to May, if this is an indication of the near-term direction, it’s a warning for the markets,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors, in reference to the Challenger jobs data.

The shutdown, now in its 37th day, added uncertainty to the economic outlook, said Baird, as the longer it lasts, the higher its likely impact on the economy. “Does the sentiment shift in a more negative direction? Do consumers retrench further, particularly if they’re concerned about the overall labor market situation? … It has to be factored in the longer the shutdown lasts.”

Rates futures traders on Thursday assigned a 69% probability that the Fed would cut rates by 25 basis points at its December 9-10 policy meeting, up from 62% on Wednesday, CME Group data showed.

Benchmark 10-year yields US10Y dropped to 4.106% from 4.149% on Wednesday, while two-year yields (US2YT=RR) declined by nearly four basis points to 3.58%.

At the same time, despite market concerns over a weakening labor market, Chicago Fed President Austan Goolsbee said the lack of official data on inflation during the government shutdown accentuated his caution about cutting rates further.

SUPREME COURT CONSIDERS TARIFFS CASE

Investors are also assessing the potential impact of a U.S.

Lower revenue from tariffs could lead to wider government budget deficits and more Treasury debt supply hitting the markets, which would be negative for bonds. At the same time, the prospect that tariffs may be permanently revoked could be positive for Treasuries as it would remove a cause of inflation.

“Early indications from the U.S. Supreme Court indicate skepticism over the legal standing of Trump’s tariffs and the obvious question is whether this is bond-bearish or bullish. Yes, both,” BMO Capital Markets analysts said in a note.