U.S. Labor: October job gains top forecasts amid political shift

U.S. employers created 165,000 new jobs in October, a figure that substantially exceeded the 65,000 positions economists had projected. The unemployment rate dropped to 4.1% despite a surge in labor force participation. The Labor Department reported these figures on November 6, three days after voters granted Democrats full control of Congress in the midterm elections. Many voters had expressed frustration with the high cost of living and the general state of the economy.

The Department of Labor revised its data for previous months, adding 84,000 jobs to the totals for August and September. The decline in the unemployment rate occurred even as 421,000 people entered the labor force. Average hourly wages increased by 0.4% from September. This marked the largest month-over-month gain in wages since January of this year.

Angelo Kourkafas, senior global strategist at Edward Jones, characterized the data as a blowout report. He noted that payroll growth exceeded expectations, revisions were positive, the unemployment rate fell, participation improved, and wage growth strengthened. The strong hiring numbers may lead the Federal Reserve to continue its focus on combatting inflation. The central bank typically raises its key interest rate to cool borrowing and spending when hiring is healthy.

Wall Street investors currently view the probability of a rate hike at the Fed’s December meeting as 77%. This figure is up approximately 10 points from Thursday, according to CME’s Fedwatch tool. Solid hiring also suggests to many Fed officials that the current key rate may not be high enough to slow inflation. However, wage growth remained modest. Hourly earnings lagged behind annual inflation for the seventh consecutive month. Wages rose by 3.1% from October 2025.

Professional and business services added 70,000 jobs, while healthcare companies hired nearly 42,000 workers. Factories contributed 19,000 new positions. In contrast, hotels, restaurants, and bars cut 10,600 jobs. The broader economy has shown resilience against various shocks, including double-digit taxes on imports and a war with Iran that pushed U.S. gasoline prices above $4 a gallon. Gross domestic product advanced at an annual pace of 3.4% from July through September, driven by strong consumer spending and investment in artificial intelligence.

Employers have added an average of 86,000 jobs per month so far this year. This pace is an improvement over 2025, when monthly job creation averaged 9,700 positions. That previous figure represented the weakest performance outside of a recession since 2002. Last year, high interest rates and unpredictable trade policies discouraged hiring. Current hiring remains well below the average of 166,000 monthly jobs created in 2023 and 2024. It is also far below the 491,000 monthly average recorded during the 2021 and 2022 hiring boom following the pandemic.

Economists describe the current environment as one of low firing and low hiring. Employers are reluctant to dismiss existing workers but are not in a hurry to add new staff. Young people entering the workforce or those who have lost jobs may struggle to find employment. The number of new jobs required to keep the unemployment rate stable has decreased significantly. In late 2023, this break-even point was approximately 166,000 new jobs per month. It is now just over 5,000, according to an estimate from Yale University’s Budget Lab. This shift reflects fewer people competing for work due to baby boomer retirements and immigration policies.