October Jobs Report Smashes Forecasts as Hiring Surges

US employers added one hundred and sixty-five thousand jobs in October, far more than economists had expected, in a report that landed the morning after Wall Street suffered its worst sell-off in more than a year. The October jobs report showed the unemployment rate falling to 4.1% from 4.2% in September, according to the Bureau of Labor Statistics.

Economists polled by Reuters had forecast a gain of 65K, with estimates running from 35K to 125K. The result beat even the most optimistic forecast in the survey, and it arrived a day after the S&P 500 fell 4.4% on fears about artificial intelligence spending and data centre construction. Traders had spent the week asking whether the labour market was weakening. The answer, on the figures, was no.

The bureau also revised its figures for the two previous months higher. September's gain, first reported as 29K, was raised to 60K, and August was lifted to 186K. The two-month net revision added 84K jobs that had not been counted in the earlier releases. Taken together, the three months show hiring running well ahead of the pace economists had pencilled in at the start of autumn.

Where the jobs came from

Professional and business services led the gains, adding 70K positions in the month, well above the average monthly gain of 15K over the past year. Health care added 42K jobs, transportation and warehousing added 25K, and manufacturing added 19K. Private payrolls rose 159K, against a forecast of 64K, while government payrolls added 6K after falling 17K the month before.

Pay growth also came in stronger than expected. Average hourly earnings rose 0.4% from September, above the 0.3% economists had forecast, and were up 3.1% from a year earlier. The labour force participation rate edged up to 61.9% from 61.8%. The figures point to a labour market that is still tight, even as employers say they are cautious about adding headcount while they work out how to use artificial intelligence and cope with higher energy prices linked to the war between the United States and Israel and Iran.

What it means for interest rates

The report gives the Federal Reserve more room to concentrate on inflation. The central bank left its benchmark overnight rate in the 3.75% to 4.00% range last week, and economists expect a rate rise in December. Traders put the chance of a December increase at 67% before the report, and the stronger hiring figures are likely to keep that bet in place. October consumer inflation data, due on Tuesday, is the next input for policymakers.

The hiring figures sit alongside other signs that the economy is holding up. Gross domestic product grew at a 3.4% annualised rate in the third quarter, driven by consumer spending and business investment in artificial intelligence. Job openings climbed to 7.52 million in September, up by 333K from August. Economists estimate the economy needs to create about 40K jobs a month to keep up with growth in the working-age population, a breakeven rate that has fallen from roughly 150K in 2024 as the labour force has grown more slowly.

Stock futures were mixed in early trading on Friday after the report, with investors weighing the strong hiring figures against the prospect of higher rates for longer. The Federal Reserve's next policy meeting is on December 9, and officials will have one more jobs report and the October inflation figures before they decide. The University of Michigan releases its consumer sentiment survey at 10 a.m. on Friday, offering a read on how households feel about prices and job prospects after a week in which US stocks lost trillions of dollars in market value.

Not everyone is finding work easily. The Reuters report noted that limited openings have made it difficult for young adults, recent graduates and some unemployed people to find jobs, and that some businesses probably overhired after the pandemic and are still uncertain about staffing needs. Layoffs hit a three-year low in October, which helps explain why the jobless rate stayed low even as hiring slowed in some sectors. So far this year, employers have added an average of 86K jobs a month, according to the Associated Press. Federal Reserve officials Alberto Musalem and Michelle Bowman are both due to speak on Friday, and the next monthly jobs report is scheduled for December 4. For more detail, see the Reuters wrap-up of the jobs report, the sector breakdown reported by Realtor, and NPR's account of the hiring jump.