By Kate Duguid
NEW YORK, Nov 1 (Reuters) - Yields on U.S. government bonds rose on Friday morning after domestic job growth slowed less than expected in October, but then pared some of those gains after the Institute for Supply Management's manufacturing indexes were weaker than forecast.
The Labor Department's report showed that a drag from a strike at General Motors was offset by gains elsewhere, while hiring in the prior two months was stronger than previously estimated, signaling that consumers would continue to prop up the slowing economy for a while.
However, shortly after the employment report was released, the Institute for Supply Management (ISM) said the manufacturing sector contracted for a third straight month in October, though at a slower pace than the previous month.
The reports come on the heels of the Federal Reserve's decision to cut interests rates on Wednesday for the third time this year to help the United States weather the global trade war without spiraling into recession. However, the Fed dropped a previous reference in its policy statement that it "will act as appropriate" to sustain the economic expansion - language that was considered a sign of future rate cuts.
"This is a good report. The Fed's statement that there's no imminent need to ease is well supported by this. (The payrolls data) is a report that gives the Fed comfort that they did the right thing yesterday. Unless there is deterioration in the next few months, they're on hold for a while," said Doug Duncan, chief economist at Fannie Mae.
"Manufacturing was down 36,000 jobs, so there was clearly a hit to that," Duncan said. "But if you think about the share of our workforce today, it's now less than 10% of our total workforce. We're now a services-based employment economy, so there's a question about whether or not the downturn in employment in that space is enough to move the whole economy lower."
The benchmark 10-year yield was last up 3 basis points to 1.721%. The two-year yield, a proxy for market expectations of interest rate moves, was up 3 basis points to 1.556%. (Reporting by Kate Duguid Editing by Chizu Nomiyama and Jonathan Oatisediting by Jonathan Oatis)