Two regional Federal Reserve banks on Friday cut their estimate of fourth-quarter economic growth after the U.S. trade gap hit its highest level in 10 years and domestic payrolls growth slowed.

The U.S. economy is expanding at a 2.4 percent annualized rate in the fourth quarter as data showed domestic payrolls growth slowed in November, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday.

This was slower than the 2.7 percent pace for fourth-quarter gross domestic product that the Atlanta Fed’s GDP program calculated on Thursday.

Meanwhile, the New York Federal Reserve’s Nowcast model showed the U.S. economy is growing at a 2.44 percent clip in the fourth quarter as data showed the U.S. trade gap hit its widest in 10 years in October and domestic payrolls growth slowed in November. This was slower than the 2.50 percent rate calculated by N.Y. Fed’s program the previous week.

Late last month, the government said the U.S. economy slowed in the third quarter as previously reported, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3 percent target this year, even as momentum appears to have moderated further early in the fourth quarter.

Gross domestic product increased at a 3.5 percent annualized rate, the Commerce Department said in its second estimate of third-quarter GDP growth. That was unchanged from its estimate in October and well above the economy’s growth potential, which economists estimate to be about 2 percent.

The Atlanta Fed issued the revised forecast after U.S. job growth slowed in November and monthly wages increased less than expected, suggesting some moderation in economic activity that could support expectations of fewer interest rate increases from the Federal Reserve in 2019.

The Labor Department's closely watched monthly employment report on Friday came against a backdrop of a steep sell-off on Wall Street and a partial inversion of the U.S. yield curve, which have stoked fears of a recession.

"This is still a solid gain that suggests economic growth is gradually slowing back towards its potential pace," said Paul Ashworth, chief economist at Capital Economics in Toronto. "There is nothing here to suggest the economy is suffering a more sudden downturn."

Nonfarm payrolls increased by 155,000 jobs last month, with construction companies hiring the fewest workers in eight months, likely because of unseasonably chilly temperatures.

Some of the moderation in hiring in November could be the result of a shortage of qualified workers. But it also fits in with other data showing a rise in layoffs in recent weeks and a decline in a measure of services sector employment in November.

Data for September and October were revised to show 12,000 fewer jobs added than previously reported. Economists polled by Reuters had forecast payrolls increasing by 200,000 jobs in November. The unemployment rate was unchanged at near a 49-year low of 3.7 percent as more people entered the labor force.

Average hourly earnings rose six cents, or 0.2 percent in November. October wage gains were revised down to 0.1 percent from the previously reported 0.2 percent. In the 12 months through November, wages increased 3.1 percent, matching October's jump, which was the biggest gain since April 2009.

Companies also reduced hours for workers. The average workweek fell to 34.4 hours from 34.5 hours in October.

The employment report comes as soft October data on the housing market, business spending on equipment as well as a jump in the trade deficit to a 10-year high have heightened fears the economy is slowing. Growth forecasts for the fourth quarter are around a 2.7 percent annualized rate. The economy grew at a 3.5 percent pace in the third quarter.

In the wake of the employment report, U.S. financial markets continued to price in one rate hike from the Fed in 2019, compared with expectations for possibly two rate hikes a month earlier, according to CME Group's FedWatch program.

The U.S. central bank is expected to increase borrowing costs on Dec. 18-19 for the fourth time this year.

The dollar fell against a basket of currencies on the data. U.S. Treasury prices were mixed. Stocks on Wall Street were trading higher.

Stocks have been hurt by uncertainty whether a 90-day truce agreed by U.S. President Donald Trump and Chinese President Xi Jinping over the weekend will hold and lead to a lasting easing of trade tensions between the world's two largest economies.

RATE HIKE PAUSE?

"The data fits with some slowing from trend ... but is far from unhealthy for this point in the cycle," said Alan Ruskin, global co-head of FX research at Deutsche Bank Securities. "It still allows the Fed to hike in December, but take a more cautious line thereafter."

Fed Chairman Jerome Powell last month appeared to signal the central bank's three-year tightening cycle was drawing to a close, saying its policy rate was now "just below" estimates of a level that neither cools nor boosts a healthy economy.

Minutes of the Fed's November policy meeting published last week showed nearly all officials agreed another rate increase was "likely to be warranted fairly soon," but also opened debate on when to pause further hikes.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, rose two-tenths of a percentage point to a five-month high of 7.6 percent.

Wage gains were moderate despite online retail giant Amazon.com Inc raising its minimum wage to $15 per hour for U.S. employees last month.

Job gains have averaged 170,000 per month over the past three months. The economy needs to create roughly 100,000 per month to keep up with growth in the working-age population. Employment growth could slow further in the months ahead.

The number of Americans applying for unemployment benefits is near eight-month highs. General Motors has announced plans to cut up to 15,000 jobs in North America next year, which will affect some assembly plants in the United States.

Retail employment increased by 18,200 jobs in November, likely boosted by an early Thanksgiving. Transportation and warehousing payrolls rose by 25,400 jobs, driven by seasonal hiring.

However, an unusually cold November slowed hiring at construction sites. Construction employment rose by only 5,000 jobs after companies added 24,000 workers to their payrolls in October. Manufacturing employment increased by 27,000 jobs last month after rising 26,000 in October.

Government payrolls declined for a second straight month. State government employment fell sharply in November.

The next GDPNow update is Friday, December 14.