October jobs beat forecasts as wage gains lag inflation

The U.S. economy added 165,000 new jobs in October, a number that far exceeded the 65,000 positions economists had projected. The unemployment rate dropped to 4.1%, even as 421,000 people joined the labor force. This data arrived three days after voters shifted full control of Congress to the Democrats in the midterm elections, a move driven by frustration over the high cost of living.

Labor Department revisions also boosted the total job count for the summer. The agency added a combined 84,000 jobs to the figures for August and September. Average hourly wages increased by 0.4% from September to October, marking the largest month-over-month gain since January. Despite this recent uptick, wages are up only 3.1% from October 2025, meaning purchasing power has declined for many workers over the last year.

Angelo Kourkofas, senior global strategist at Edward Jones, called the data a blowout jobs report. He noted that payroll growth exceeded expectations, revisions were positive, and wage growth strengthened. Brian Bethune, an economist at Boston College, expects the Federal Reserve to use this confidence in the labor market to raise interest rates. He predicts a rate increase in December and possibly another in early 2027.

Wall Street investors now see a 77% chance of a December rate hike, according to CME’s FedWatch. That probability rose by about 10 percentage points from Thursday. The central bank raised rates in September but held them steady at its most recent meeting. Many Fed officials believe the current rate is not high enough to slow persistently high inflation.

Hiring activity varied by sector. Professional and business services added 70,000 jobs, while healthcare companies hired nearly 42,000 workers. Factories created 19,000 positions. In contrast, hotels, restaurants, and bars cut 10,600 jobs. The overall job market has remained solid but modest this year, with employers adding an average of 86,000 jobs per month.

This pace represents an improvement over 2025, when monthly job creation averaged just 9,700. That 2025 figure was the weakest performance outside of a recession since 2002, driven by high interest rates and unpredictable trade policies. However, the current hiring rate is still well below the average of 166,000 jobs created monthly in 2023 and 2024. It is also far lower than the 491,000 jobs added per month during the 2021 and 2022 hiring boom.

Economists describe the current environment as one of low hiring and low firing. Employers are reluctant to let go of existing staff but are not rushing to hire new ones. This trend can make it difficult for young workers or those who have lost jobs to find new employment. The number of new jobs required to keep unemployment stable has also dropped. It is now just over 5,000 per month, down from about 166,000 in late 2023, according to a Yale University Budget Lab estimate.

The economy has shown resilience despite recent shocks, including double-digit tariffs on imports and a war with Iran that pushed U.S. gasoline prices above $4 a gallon. Gross domestic product advanced at a 3.4% annual pace from July through September, fueled by strong consumer spending and investment in artificial intelligence. While AI may reduce the need for some workers, it is also creating new roles focused on using the technology to increase efficiency.

SharkNinja, a company based in Needham, Massachusetts, illustrates this shift. Sales for the company jumped 21% in the latest quarter as shoppers bought appliances to save money on dining out. CEO Mark Barrocas says the company has slowed its hiring plans to 5% next year, down from 8% to 10% in the previous two years. The firm, which employs 4,200 people globally, has implemented AI tools in product innovation, media planning, and finance to allow staff to focus on higher impact initiatives.