The US economy added jobs at a stronger-than-expected pace in October, while the unemployment rate fell as the labor market showed surprising strength.
Nonfarm payrolls increased by a seasonally adjusted 165,000 for the month, compared with the Dow Jones estimate of 59,000, the Bureau of Labor Statistics reported Friday.
The unemployment rate fell to 4.1%, compared to the forecast of 4.2%. A broader measure including unemployed workers and those working part-time for economic reasons rose to 7.9%, up 0.3 percentage points, amid a 421,000 increase in the civilian workforce.
In addition to the strong payroll gains for October, the previous month was substantially revised: The August figure moved to 186,000, revised up 53,000, while the September count moved to 60,000 after a revised up 31,000.
“You’d have to look really hard to find something to dislike there,” said Dan North, senior economist at Allianz Trade North America. “It’s a very good report, and all around I think you’d say it’s stronger than expected and the best in a while, and it’s consistent with what we call a stable but maybe not exciting labor market.”
Payroll gains are also better than forecast. Average hourly earnings rose 0.4% in the month and 3.1% year-on-year, compared to the respective forecasts for 0.3% and 2.9%. The average working week was unchanged at 34.4 hours.
“Today’s jobs report is a strong rebuttal to concerns that the economy will slow down significantly,” said Seema Shah, head of global strategy at Principal Asset Management. “The growth of payrolls was surprisingly high, unemployment fell back to 4.1%, and job creation remains broad-based, pointing to an economy that still absorbs comfortable workers instead of one since the buckle in a tighter financial situation.”
The breadth of job growth was also strong, contrary to the trend when health care contributed most of the gains.
Professional and business services added 70,000 to lead all sectors, while health care was at 42,000. Other areas with significant growth include transportation and warehousing (25,000) and manufacturing (19,000).
“The overall picture is that the labor market is better than it was a year ago,” said Heather Long, chief economist at Navy Federal Credit Union. “By 2025, the economy is adding nearly 10,000 jobs per month and most of them are in health care…
The report comes in the same week as the election where the economy and inflation are mainly at the center of attention. Democrats suffered a national defeat that would have given their party control of both chambers of Congress after campaigning hard to address affordability issues.
For the Federal Reserve, the report also comes at an important time. The central banker is considering whether to continue raising interest rates in December as inflation remains stubbornly above the central bank’s 2% target.
Traders raised the possibility of another quarterly percentage increase when the Federal Open Market Committee met 8-9. December. Odds rose to 76.8%, according to CME Group’s FedWatch tool, although the indicator only added one more. The likelihood of a further hike in 2027 has diminished in recent days, following the midterm election defeats and a sell-off in tech stocks on Thursday.
Market reaction was otherwise muted, with a mixed picture at the open stock market futures. Treasury yields are higher across the board.
The share of workers looking for work or already employed as part of the labor force, known as the labor force participation rate, rose even higher to 61.9%. The labor force has been shrinking, the result of demographic changes and reduced immigration, but it expanded by 421,000 in October.
At the same time, the household report, which is used to calculate the unemployment rate, showed 463,000 more people were working.
However, long-term unemployment rose sharply.
The average duration of unemployment rose to 27.1 weeks, up 2.3 weeks from the previous month to the highest since September 2021. Those unemployed for more than 27 weeks rose to 1.96 million, the most since December 2021.