October Jobs Report Shatters Expectations, Pushing Fed Hike Odds Higher

The U.S. labor market outperformed Wall Street expectations in October, adding 165,000 nonfarm payrolls according to the Bureau of Labor Statistics.

The figure tripled the 59,000 projected by the Dow Jones consensus estimate. This strong start to the month comes just days after a nationwide election in which economic affordability was a central theme.

The unemployment rate declined to 4.1%, down from the 4.2% forecast. However, a broader measure of labor underutilization, which includes discouraged workers and part-time employees seeking full-time work, rose to 7.9%.

This increase reflects a growth of 421,000 in the civilian labor force. The BLS also revised previous data upward, lifting the August payroll count to 186,000 and the September figure to 60,000.

Wage growth accelerated as well. Average hourly earnings rose 0.4% month over month and 3.1% year over year, surpassing forecasts of 0.3% and 2.9%, respectively. The average workweek remained flat at 34.4 hours.

Job gains were distributed across multiple sectors rather than concentrated in health care. Professional and business services led with 70,000 new positions, followed by health care with 42,000. Transportation and warehousing added 25,000 jobs, while manufacturing gained 19,000.

Market traders responded to the data by increasing the likelihood of a Federal Reserve interest rate hike in December. According to the CME Group's FedWatch tool, the probability of a quarter-point increase at the Dec. 8-9 meeting rose to 76.8%. This follows a period where inflation remained above the central bank's 2% target.