The U.S. labour market delivered a stronger-than-expected performance in October, adding 165,000 jobs and pushing the unemployment rate down to 4.1%, according to employment figures released on Friday, November 6.
The increase in nonfarm payroll employment substantially exceeded economists’ expectations of approximately 59,000 to 65,000 new positions, signalling renewed momentum in the American economy following a period of slower hiring earlier in the year.
The unemployment rate declined from 4.2% in September to 4.1%, even as approximately 421,000 additional people entered the labour force, suggesting that employers were absorbing new workers despite broader economic uncertainty.
The report also included significant upward revisions to employment figures for the previous two months, indicating that the labour market had performed more strongly than initially estimated.
August’s employment gains were revised upward by 53,000 to 186,000 jobs, while September’s figures increased by 31,000 to 60,000 positions. Together, the revisions added 84,000 jobs to previously reported employment totals.
The stronger employment figures have raised expectations that the U.S. Federal Reserve could increase interest rates at its December meeting as policymakers continue efforts to contain inflation.
Professional services and healthcare lead employment growth
Hiring gains were concentrated in professional and business services, healthcare, transportation and manufacturing, reflecting continued demand for workers across several major industries.
Professional and business services recorded the largest increase, adding approximately 70,000 jobs in October. Within the sector, professional, scientific and technical services gained 33,000 positions, while administrative and support services added another 28,000.
Healthcare employment increased by 42,000, exceeding its average monthly growth over the previous year. Hospitals accounted for approximately 16,000 new positions, while home healthcare services contributed another 11,000.
Transportation and warehousing added 25,000 jobs, including 17,000 positions in courier and messenger services, as businesses prepared for increased shipping demand ahead of the holiday shopping season.
Manufacturing also recorded a notable increase, adding 19,000 positions and extending its employment growth to a fifth consecutive month.
Government employment rose modestly by 6,000, supported by an increase of 8,000 state government positions, which offset combined losses of approximately 2,000 jobs at the federal and local levels.
However, employment growth was not universal. Leisure and hospitality lost approximately 10,600 positions, with restaurants, hotels and other hospitality businesses reducing staffing amid seasonal adjustments.
Wage growth accelerates as inflation concerns persist
Average hourly earnings increased by 0.4% in October, marking the strongest monthly wage growth since January.
On an annual basis, wages rose by 3.1%, exceeding economists’ expectations but continuing to raise questions about whether household earnings are keeping pace with consumer prices.
Although stronger wage growth provides additional income for workers, persistent inflation continues to affect household purchasing power, particularly for families facing higher costs for housing, groceries and other necessities.
The combination of stronger hiring, declining unemployment and accelerating wages suggests that the U.S. labour market remains resilient despite higher borrowing costs and uncertainty surrounding trade and economic policy.
Federal Reserve rate hike expectations rise
The unexpectedly strong employment report prompted financial markets to reassess the outlook for U.S. monetary policy.
According to CME FedWatch estimates cited following the release, traders increased the probability of a 25-basis-point interest rate hike at the Federal Reserve’s December 9 meeting to approximately 73% to 76%, compared with around 67% the previous day.
The figures suggest that investors increasingly expect the central bank to maintain a restrictive monetary policy stance as it seeks to prevent inflation from becoming entrenched.
U.S. Treasury yields also climbed following the employment announcement, reflecting expectations of higher interest rates.
The benchmark 10-year Treasury yield reportedly rose to 4.855%, while the two-year yield increased to approximately 4.512%.
Higher bond yields can translate into increased borrowing costs for consumers and businesses, affecting mortgage rates, corporate financing and investment decisions.
Strong employment report follows U.S. midterm elections
The labour market figures were released three days after the November 3 U.S. midterm elections, which saw Democrats secure control of both chambers of Congress amid widespread concerns about inflation, household affordability and economic conditions.
President Donald Trump’s administration pointed to the employment gains as evidence of renewed economic momentum, particularly in manufacturing and private-sector investment.
However, the stronger employment numbers do not eliminate concerns about the cost of living, as American households continue to face pressure from elevated consumer prices and borrowing costs.
The report also highlights a divergence between the U.S. and Canadian labour markets. While the United States added 165,000 jobs in October, Canada reported a loss of 4,700 positions, with its unemployment rate rising to 6.7%.
The difference underscores the contrasting economic challenges facing the two countries, particularly as their central banks navigate inflationary pressures and changing employment conditions.
For the Federal Reserve, the latest figures provide additional evidence of labour market resilience, potentially allowing policymakers to place greater emphasis on controlling inflation.
Nevertheless, the central bank’s December decision will depend on subsequent inflation readings, employment data and broader economic developments.
The next U.S. employment report, covering November, is scheduled for December 4, ahead of the Federal Reserve’s December 9 policy announcement.
