U.S. employers added 165,000 jobs in October, more than double what economists had forecast, and the unemployment rate fell to 4.1% from 4.2%, the Bureau of Labor Statistics said Friday. The surprise strengthens the case for the Federal Reserve to raise interest rates again in December.
Earlier months looked better, too. August's gain was revised up by 53,000 to 186,000 and September's by 31,000 to 60,000, adding a combined 84,000 jobs. Hiring has now averaged 137,000 a month over the past three months, compared with an average loss of 45,000 in the same stretch of 2025.
The gains were unusually broad. Professional and business services led with 70,000 jobs, far above that sector's average of 15,000 a month over the past year, followed by health care at 42,000, transportation and warehousing at 25,000 and manufacturing at 19,000. Construction lost 3,000 jobs.
That breadth marks a shift. Heather Long, chief economist at Navy Federal Credit Union, said the economy added barely 10,000 jobs a month in 2025, nearly all of them in health care.
Rate hike odds climb
Futures pricing tracked by CME's FedWatch tool put the odds of a quarter-point hike at the Fed's Dec. 8-9 meeting at roughly 77% to 80% after the release, up from about 67% on Thursday. The Fed raised its benchmark rate in September, then held it at 3.75% to 4% last week in a 10-2 vote, with inflation still well above its 2% target.
Boston College economist Brian Bethune said he expects another increase in December and possibly one more in early 2027. Still, he attributed much of the recent hiring strength to a jump in federal spending in the third quarter and a surge of election spending near $12 billion between August and October.
Some traders also questioned whether the Fed would want to tighten after Thursday's tech sell-off, which was driven by fears that Democratic gains in the midterms could slow the artificial intelligence buildout. A consumer inflation report for October is due Tuesday.
Cracks beneath the headline
Not every measure improved. A broader unemployment rate that counts discouraged workers and involuntary part-timers rose to 7.9% from 7.6%, and the number of people working part-time for economic reasons climbed 339,000 to 4.84 million.
Joblessness is also lasting longer. The average spell of unemployment reached 27.1 weeks, the highest since September 2021, and 1.96 million people had been out of work for more than 27 weeks, the most since December 2021.
More than a quarter of unemployed workers were searching for six months or longer in October, a share rarely seen outside the aftermath of a recession,
Cory Stahle, senior economist at the Indeed Hiring Lab
The labor force grew by 421,000, lifting participation to 61.9% from 61.6% in August, but many of those newcomers, mostly people returning to the job hunt, have not found work.
Average hourly earnings rose 0.4% for the month and 3.1% from a year earlier, beating estimates but trailing September's 3.7% annual rise in consumer prices. Dan North, a senior economist at Allianz Trade, said wages lagging inflation are lowering living standards even for people with jobs.
The report landed three days after voters, frustrated by the cost of living, handed Democrats control of both chambers of Congress in a defeat for President Donald Trump and Republicans. The war with Iran has pushed gasoline above $4 a gallon.
