October jobs report beats forecasts with 165,000 new positions

The U.S. labor market outperformed expectations in October, with the economy adding 165,000 nonfarm payrolls. The Bureau of Labor Statistics released the data on Friday, showing a figure that far exceeded the Dow Jones estimate of 59,000. The unemployment rate also declined slightly to 4.1%, coming in lower than the forecasted 4.2%.

The strength in the report was not limited to the current month. Previous figures were revised upward to reflect higher growth. August payroll gains were adjusted to 186,000, an increase of 53,000 from the original report. September numbers were revised up by 31,000 to reach 60,000. This revision indicates that hiring has been more robust over the last quarter than initially thought.

Wages continued to rise alongside job creation. Average hourly earnings increased by 0.4% from the previous month and 3.1% on an annual basis. Both figures surpassed analyst predictions of 0.3% and 2.9%, respectively. The average work week remained steady at 34.4 hours.

Job growth spread across multiple industries, breaking from a recent trend where health care dominated hiring. Professional and business services led the gain with 70,000 new jobs. Health care followed with 42,000 positions added. Transportation and warehousing contributed 25,000 jobs, while manufacturing added 19,000. A broader measure of unemployment, which includes part-time workers seeking full-time roles, rose to 7.9% as the civilian labor force grew by 421,000.

The report arrived during a week of major political activity. Democrats won control of both houses of Congress in the midterm elections, having campaigned heavily on economic affordability. For the Federal Reserve, the data complicates decisions regarding interest rates. Officials are considering whether to resume rate hikes in December because inflation remains above their 2% target.

Financial markets reacted with caution. Traders increased the likelihood of a quarter percentage point rate hike at the Federal Open Market Committee meeting scheduled for December 8 and 9. The CME Group's FedWatch tool now shows a 76.8% probability for that action. Stock market futures were mixed, and Treasury yields rose across the board following the release.