Jobs Report: Payrolls Jump 165,000 in October, Blowing Past the 65,000 Forecast — Unemployment Falls to 4.1 Percent
The October jobs report was not close: employers added 165,000 jobs, more than two and a half times the Reuters forecast, September was revised up to 60,000, and unemployment ticked down to 4.1 percent — a hot report that pushed Treasury yields higher and lifted December rate-hike bets to 78 percent.
U.S. employers added 165,000 jobs in October, far more than expected, and the unemployment rate fell to 4.1 percent, the Bureau of Labor Statistics reported Friday — a resilient labor-market reading that gives the Federal Reserve more scope to focus on inflation. Payrolls rose after an upwardly revised gain of 60,000 in September; economists polled by Reuters had forecast 65,000, after September was first reported at just 29,000, and estimates had ranged from 35,000 to 125,000. August and September together were revised up by a combined 84,000 jobs, which means the fall hiring picture was stronger all along than the first prints showed.
The gains were broad and led by services. Professional and business services added 70,000 jobs in October, well above the sector's average monthly gain of 15,000 over the previous year, healthcare added 42,000 against a 31,000 average, and transportation and warehousing added 25,000, with manufacturing up 19,000; private payrolls rose 159,000 in total. The number of unemployed people held at 7.1 million, long-term unemployment stayed near 2 million — 27.6 percent of all unemployed — and the labor force participation rate edged up to 61.9 percent. Average hourly earnings rose 14 cents, or 0.4 percent, to $38.00, up 3.1 percent from a year earlier.
Wall Street's reaction was split in the way this week keeps splitting. Stock futures stayed mixed after the report, with Nasdaq futures up 1.4 percent and S&P 500 futures up 0.3 percent, Reuters reported, while Treasury yields rose before pulling back — the 2-year up 5 basis points to 4.52 percent, the 10-year up 4 basis points to 4.88 percent and the 30-year up 3.6 basis points to 5.29 percent — and the dollar index rose 0.7 percent to 102.18. Bets that the Fed raises rates next month climbed to 78 percent from 70 percent earlier. The Fed held its benchmark rate at 3.75 to 4.00 percent last week, and next Tuesday's October consumer inflation report is the next major clue before the December decision.
The strategists' argument is over what a hot report means in an affordability crisis. “I guess the Fed was right to upgrade its economic assessment from solid to strong, at least based on the October employment report,” Annex Wealth Management's Brian Jacobsen told Reuters. “The headline number blew the consensus out of the water by 100,000.” Jacobsen noted that average hourly earnings grew a respectable 3.1 percent year over year, but with inflation higher than that, real earnings declined — “That's the affordability crisis in one stat.” In New York, Spartan Capital Securities' Peter Cardillo called it “a good number” showing a labor market extending a long period of growth, with wages a little higher than expected: at roughly 4 percent unemployment, he said, the jobs market is at full capacity, which “just confirms that the Fed has no choice but to raise rates in December. And the question is, do they raise by 25 basis points or by 50 basis points?” Economists note the economy needs only about 40,000 jobs a month to keep up with working-age population growth — the so-called breakeven rate, down from roughly 150,000 in 2024 — so October's 165,000 is not just a beat; on the current math, it is a tightening labor market.
