The US added 165,000 jobs in October, more than double the roughly 65,000 economists expected, and traders now see a December Fed rate hike as likely. Here are the four things worth knowing.
1. The beat was big, and the revisions made it harder to dismiss
Nonfarm payrolls rose by 165,000 in October against a consensus of about 59,000 to 65,000, and the unemployment rate slipped to 4.1% from 4.2%. A single hot number can be noise. This one came with help from the past:
- August was revised up to 186,000 from 133,000.
- September was revised up to 60,000 from 29,000. That weak first print had given the Fed cover to hold rates in October.
- Together the revisions added 84,000 jobs to what was previously reported.
The three-month average now sits near 137,000 a month, the highest since May, compared with about 48,000 a month over the prior 12 months. For context, that is still below the roughly 166,000 a month the economy averaged in 2023 and 2024, so this looks like a labor market turning a corner rather than one that has already roared back.
2. The gains were led by business services, with healthcare and manufacturing helping
Private employers added 159,000 jobs and government added about 6,000. The mix matters more than the total:
| Sector | October change | Note |
|---|---|---|
| Professional and business services | +70,000 | Most since July 2022; 12-month average is about 15,000 |
| Healthcare and social assistance | about +55,000 | Most in six months |
| Transportation and warehousing | +25,000 | Couriers and related work |
| Manufacturing | +19,000 | Versus about 5,000 expected |
| Construction | Net loss | Shed jobs |
| Restaurants | Net loss | Cut jobs |
The business-services jump came mostly from temp help (+19,000) and management and technical consulting (+17,000). Some economists read that as employers testing demand before committing to permanent hires, which is a softer kind of strength than broad-based full-time hiring.
Participation edged up to 61.9% from 61.8%, the highest since March, and a rising participation rate alongside a falling unemployment rate is the healthier combination: more people looking for work, and fewer of them without a job.
3. Wages ran hot, which is why a December Fed hike is back in play
Average hourly earnings rose 0.4% in the month (to about $38.00) and 3.1% from a year earlier. Forecasts were for 0.3% and about 2.9%. Combined with the hiring beat, that gave rate-hike bets a push:
- Futures pricing for a quarter-point hike at the Fed’s December 8-9 meeting jumped to roughly 78% to 80%, from about 69% the day before.
- The 2-year Treasury yield rose nearly 5 basis points to about 4.52%, and the 10-year rose more than 3 basis points to about 4.87%.
- The US dollar strengthened on the release.
Analysts quoted after the report described the revisions and the wage numbers as the part that makes a hawkish Fed harder to argue against. For anyone trading rates, the dollar or index futures, this is the link to watch: strong jobs and firm wages feed hike expectations, and hike expectations move yields and the dollar.
4. Under the strong headline, there are cracks
The same report has weaker spots that a good headline can hide:
- Long-term unemployment is rising. About 2 million people have been out of work for 27 weeks or more. They made up 27.6% of all unemployed workers, the highest share since late 2021.
- Underemployment ticked up. The broad U-6 rate rose to 7.9% from 7.6%, which includes people stuck in part-time work who want full-time hours.
- Real wages are still under pressure. Wage growth of 3.1% beats the forecast, but economists like Jared Bernstein point out that inflation has outpaced wage gains for seven straight months, so paychecks are buying less even as they grow.
Put simply, hiring is picking up, but the people who lost jobs earlier are finding it hard to get back in, and the gains are not yet reaching household budgets. That is the counterargument Fed doves will lean on.
What to watch next
The November jobs report is due Friday, December 4, and the Fed meets December 8-9. The test is whether October’s strength holds up once the temp-heavy business-services bump fades, and whether wage growth stays near 3% or higher.