U.S. economy added 165,000 jobs in October, above expectations - USA Today

U.S. employers added a surprising 165,000 jobs in October, the Labor Department estimated Nov. 6, surpassing forecasters' expectations and extending previous months' trend of sharp swings in hiring.

Past months' payroll gains were revised up, reflecting a stronger demand for workers than previously estimated. The department now reports U.S. employers added 60,000 jobs in September, up from the initial estimate of 29,000, and that they added 186,000 jobs in August.

Worker pay also ticked up last month, but likely still not enough to outpace inflation. Average hourly earnings for employees on private, nonfarm payrolls, which is calculated as a mean, rose by 14 cents to $38.00 in October. Over the year, they were up 3.1%. In comparison, consumer prices rose 3.7% over the year in September.

Relative to past years, fewer people are joining the workforce. But the labor force participation rate inched up to 61.9% in October from 61.8% in September. In general, a smaller labor force means U.S. employers need to add fewer jobs to keep the unemployment rate steady. It ticked to 4.1% in October, down from 4.2% the month before. 

That reading likely gives Federal Reserve officials, tasked with keeping unemployment low and prices steady, the green light to prioritize concerns about persistent inflation at their next meeting. As of Nov. 6, most forecasters believe that focus will motivate policymakers to raise their benchmark for short-term interest rates by a quarter-point in December, according to CME FedWatch.

"While the data push back against fears of a major growth slowdown, we would be cautious about extrapolating one strong report, as tighter financial and credit conditions are likely to weigh on activity down the road," Angelo Kourkafas, a senior global strategist at Edward Jones, said in a note. "Nonetheless, the report is a good reminder that the economy remains on solid footing despite the recent AI-driven market volatility."

The Labor Department estimates U.S. employers added 165,000 jobs in October, much higher than the average monthly gain of 48,000 over the prior year. Revisions also drove August and September payroll gains up. 

The unemployment rate ticked down last month.

October’s payroll gains were driven by a rise in professional and business services employment. The department estimates the sector added 70,000 jobs last month. 

Healthcare, typically a reliable engine of job growth, added 42,000 jobs. Transportation and warehousing added 25,000, and employment in the manufacturing industry continued to trend up, adding 19,000.  

The department said employment was little changed in other industries, including construction, financial activities, social assistance, leisure and hospitality, and government. 

While the department's jobs report is considered the gold standard for labor market data, ADP’s National Employment Report released Nov. 4 offered a different read on market conditions. 

It found private employers added 86,000 jobs in October, with most gains in the trade, transportation, and utilities sector, as well as in education and health services, and leisure and hospitality. ADP also found the largest job cuts last month were in professional and business services, which it said shed 27,000 jobs, contradicting the department's data.

Low layoffs, jobless claims, and a smaller unemployment rate point to a labor market that's solid. 

"On the employment side of the Fed's dual mandate, conditions are quite positive," Fed Chair Kevin Warsh said Oct. 28. 

But that doesn't mean it's a perfect time for job seekers to find work. Fierce competition, the rising use of artificial intelligence in the hiring process, and wary employers have left some unemployed Americans in long searches. Despite a strong October estimate, economic uncertainty has kept employers in "low-hire" mode for much of this year.

"It still remains difficult to take that good news fully for what it is – there is still a lot of tarnish in the job market beneath the headline shine, and much of the pain continues to be felt by unemployed workers seeking a way in," Cory Stahle, senior economist at Indeed, said in a note. 

Over the last three years, the number of long-term unemployed Americans, or those without work for 27 weeks or more, has surged. It rose from about 1.1 million in 2023 to 2 million in October this year, according to department estimates.

(This is a developing story that will be updated to add new information.)

Reach economy reporter Rachel Barber at rbarber@usatoday.com. Follow her on X @rachelbarber_ and on LinkedIn.