U.S. October payrolls surge 165,000, unemployment drops to 4.1%
Nonfarm payrolls increased by 165,000 in October, beating forecasts, while the unemployment rate fell to 4.1%, prompting higher expectations for a Federal Reserve rate hike.
U.S. nonfarm payrolls rose by 165,000 in October, well above the 65,000 jobs economists had forecast, and the unemployment rate slipped to 4.1% from 4.2% in September, according to the Labor Department's Bureau of Labor Statistics. The stronger-than-expected hiring data lifted Treasury yields, with the two-year yield up 6 basis points to 4.52% and the ten-year to 4.87%, before easing slightly. The U.S. dollar index also rose 0.7% to 102.22.
Market participants increased bets that the Federal Reserve will raise rates at its next meeting, with the probability rising to 78% from 70% after the report.
"This was a much stronger report than expected, and to us the upward revisions are just as telling as the headline beat," said Anshul Sharma, chief investment officer at Savvy Wealth. He noted that professional and business services added 70,000 jobs and highlighted a rise in involuntary part-time work, suggesting lingering slack in the labor market.
"Numbers came in better than expected at 165K, compared with estimates of 70K," said Steve Kolano, chief investment officer at Integrated Partners. He pointed to private payroll gains and a declining initial jobless claims count as signs of solid employment.
"The US economy added 165,000 jobs in October while the unemployment rate fell to 4.1%, versus Wall Street estimates of 65,000 jobs and a 4.2% unemployment rate," said Tim Holland, chief investment officer at Orion. He warned that the data could increase the likelihood of a Fed rate hike and push bond yields higher, adding pressure to risk assets.
"This is a bit of a hawkish jobs report for the Federal Reserve and I think it does make an interest rate cut less likely in the near term," said Susannah Streeter, chief investment strategist at Wealth Club. She said the report supports keeping rates higher for longer, while noting uncertainty around the conflict in the Middle East and AI-related policy issues.
Analysts also highlighted that average hourly earnings grew 3.1% year-over-year, but real earnings remain pressured by inflation. The mixed signals of robust hiring and persistent wage-price dynamics suggest the Fed may maintain a tighter monetary stance in the coming months.