U.S. adds 165,000 jobs in October, beating forecasts as unemployment falls to 4.1%
Photo: Shutterstock via PoynterU.S. employers added 165,000 jobs in October, the Labor Department reported Friday, far above what forecasters expected — a stronger-than-anticipated reading that pushed the unemployment rate down to 4.1% and strengthened the case for the Federal Reserve to raise interest rates in December.
Nonfarm payrolls jumped by 165,000 last month after an upwardly revised 60,000 gain in September, the Bureau of Labor Statistics said Friday. Economists polled by Reuters had forecast payrolls advancing by just 65,000, after a previously reported 29,000 increase in September. Estimates ranged from 35,000 to 125,000 jobs — meaning the actual figure topped even the most optimistic forecast.
The unemployment rate declined to 4.1% from 4.2% in September, and the labor force participation rate inched up to 61.9% from 61.8%. Worker pay also ticked up: average hourly earnings for employees on private, nonfarm payrolls rose by 14 cents to $38.00 in October, up 3.1% over the year — still trailing the 3.7% rise in consumer prices over the year through September.
The report landed a day after Wall Street's worst sell-off in 19 months, with the S&P 500 falling 4.36% on Thursday as AI stocks were dumped. The stronger jobs data gave the Federal Reserve more scope to focus on inflation stemming from the Middle East conflict, Reuters reported, and as of Friday most forecasters believe policymakers will raise their benchmark for short-term interest rates by a quarter-point in December, according to CME FedWatch. The Fed last week left its benchmark overnight rate in the 3.75%–4.00% range.
Other labor-market signals this week pointed in the same direction. ADP reported Wednesday that private employers added 86,000 jobs in October, and employers announced plans to hire 444,692 workers in October, a massive increase from 90,787 in September, according to a report from Challenger, Gray & Christmas released Thursday. Historically low layoffs and a recent jump in job openings have raised the prospect of the labor market tightening.
Still, the headline strength masks a slower undercurrent. Job gains are lagging economic growth: gross domestic product increased at a 3.4% annualized rate in the third quarter, fueled by strong consumer spending and businesses investing aggressively in artificial intelligence. Economists said employers likely overhired after the COVID pandemic, and some businesses were probably uncertain about their staffing needs as they incorporated AI into their operations. Uncertainty stemming from the U.S.-Israel war with Iran, which has raised energy prices, was also making employers hesitant to increase headcount, Reuters reported.
Limited opportunities have made it difficult for young adults, recent college graduates and some unemployed people to find work, even as the overall unemployment rate sits at 4.1%. Next Tuesday's consumer inflation report for October could offer more clues on the course of monetary policy in early 2027.
Sources: Reuters, "US job growth beats expectations in October; unemployment rate falls to 4.1%" (Nov. 6, 2026); USA Today, "U.S. economy added 165,000 jobs in October, above expectations" (Nov. 6, 2026).
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