U.S. Adds 165,000 October Jobs, Increasing December Rate Hike Odds
The U.S. economy added 165,000 jobs in October, far exceeding forecasts and prompting markets to price in a higher probability of a Federal Reserve rate hike.
The Bureau of Labor Statistics reported that U.S. employers added 165,000 nonfarm payroll jobs in October, significantly surpassing economist forecasts that ranged from 59,000 to 65,000. The unemployment rate dipped to 4.1% from 4.2% in September, despite 421,000 people entering the labor force. Growth was broad-based, led by professional and business services with 70,000 gains and healthcare with 42,000, while the hospitality sector shed over 10,000 jobs.
This labor market strength comes as the Federal Reserve evaluates whether to raise interest rates during its December 8-9 meeting to combat persistent inflation. Following the report, market traders increased the probability of a rate hike to approximately 77%. Federal Reserve officials, including Chair Kevin Warsh and San Francisco President Mary Daly, indicated that positive employment conditions provide the flexibility to adopt a more restrictive monetary policy to reach inflation targets.
Economically, the data follows a volatile week for U.S. stock markets. After an initial rally following midterm elections—which saw Democrats gain full control of Congress—the Nasdaq plunged on Thursday due to concerns over AI valuations and the election of Texas Governor Gina Hinojosa, who promised a moratorium on new data centers. While markets partially recovered on Friday, annual wage growth of 3.1% continues to trail the 3.7% inflation rate, eroding worker purchasing power. Some analysts noted that while white-collar hiring rebounded, entry-level workers and recent graduates still face significant barriers to entry.
