U.S. October Jobs Report Shows 165,000 Gains, Unemployment Falls to 4.1%

The U.S. labor market blew past expectations in October. Nonfarm payrolls rose by 165,000, against a Dow Jones consensus of 59,000 and a FactSet estimate of 65,000, and the unemployment rate dipped to 4.1% from 4.2%. Professional and business services led with 70,000 new jobs, followed by health care at 42,000, with transportation and warehousing also adding positions, according to the Bureau of Labor Statistics and CNBC. Prior months were revised higher too: August now shows 186,000 jobs and September 60,000, a combined upward revision of 84,000.

Wages are the part of the report the Federal Reserve is likely to weigh most. Average hourly earnings rose 0.4% on the month to $38.00 and 3.1% from a year earlier, both a tenth or two above forecasts of 0.3% and 2.9%, while labor-force participation edged up to 61.9% from 61.8%. With fed funds already at 3.75% to 4.00% after a September increase, CME FedWatch odds of another quarter-point hike at the December 8-9 meeting rose to about 77%, from roughly two-thirds the day before. Treasury yields moved higher across the curve after the release, while stock futures were mixed.

Beneath the headline, the household survey was less uniform. Job leavers rose to 10.9% of the unemployed from 10.5%, a sign of workers quitting with confidence, but the long-term unemployed share also climbed to 27.6% from 27.1%, and BLS noted the jobless rate has held in a narrow 4.1% to 4.3% band since March.

For markets coming off a sharp tech-led sell-off this week, the report strengthens the case that the Fed tightens again in December. What to watch: November inflation data ahead of the meeting, whether wage growth keeps running above forecasts, and how rate-sensitive sectors such as housing, utilities and small caps respond to higher yields.