US Economy Added 165,000 Jobs in October, More Than Double Forecasts

US employers added 165,000 jobs in October, more than double the 65,000 gain economists polled by LSEG had expected, according to the Bureau of Labor Statistics' report released Friday. The unemployment rate ticked down to 4.1%, beating forecasts that it would hold at 4.2%.

The headline number matters because it reversed a weak September. Revisions made that rebound look even stronger. August payrolls were revised up by 53,000, from 133,000 to 186,000. September's gain was revised up by 31,000, from 29,000 to 60,000. Taken together, employment over the two months was 84,000 higher than previously reported.

Private payrolls drove the surprise: 159,000 jobs added, against an expected 64,000. Government payrolls contributed just 6,000. Within that, federal agencies shed 1,000 jobs, states added 8,000 and local governments cut 1,000.

Which sectors did the hiring?

• Professional and business services: 70,000 jobs, far above its 12-month average of 15,000 per month. Scientific and technical services added 32,900; administrative, support and waste management roles added 28,100.
• Healthcare: 41,600 jobs, above the 31,000 monthly average of the past year. Hospitals led with 16,000, home healthcare services added 10,500 and outpatient centers 4,800.
• Transportation and warehousing: 24,800 jobs, led by couriers and messengers (+17,400) and air transportation (+3,500).
• Manufacturing: 19,000 jobs, nearly four times the 5,000 economists predicted. September's gain was revised up from 9,000 to 13,000.

What does this change for job seekers and workers?

For anyone job hunting, the report points to a market still absorbing labor comfortably. But the detail carries warnings for specific groups. The number of long-term unemployed — those jobless for 27 weeks or more — held at 2 million, making up 27.6% of all unemployed. And 4.8 million people worked part-time for economic reasons in October, a jump of 339,000, meaning they wanted full-time work but could not find it or had their hours cut.

Labor force participation stood at 61.9% and the employment-population ratio at 59.3%. Both figures barely moved in October and have shown little net change since January.

For those employed, pay is accelerating. Average hourly earnings rose 3.1% year over year in October, well above the 2.4% LSEG economists expected, and 0.4% on the month against a 0.3% estimate.

What does it mean for interest rates?

The strength of the report moved markets' expectations for Federal Reserve policy. CME's FedWatch tool put the probability of a 25-basis-point hike at the Fed's December 8-9 meeting at 76.8% on Friday, up from 66.9% a week earlier. A move of that size would lift the federal funds rate to a target range of 4% to 4.25%.

Seema Shah, chief global strategist at Principal Asset Management, said the October report "is a strong rebuttal to fears that the economy is heading into a meaningful slowdown." She added: "With wage growth also picking up, a December Fed hike remains firmly on the table despite the recent tightening in financial conditions."

Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, said the "payroll number removed the traffic light at the December intersection for the Fed." In her view, tightening in the labor market gives the Fed "a license to raise rates without hindering its employment mandate," with additional tightening possible in the first quarter if inflation keeps printing strong.

Equities reacted mixed on Friday morning: the S&P 500 rose 0.65% and the Nasdaq Composite gained 1.25%, while the Dow Jones Industrial Average slipped 0.2%.

For workers and candidates, the practical takeaway is a market still creating jobs at pace — with the strongest openings in professional services, healthcare and logistics — but one where the Fed's likely December response could gradually raise borrowing costs in the months ahead.