WRAPUP 3-US job growth surges in October; unemployment rate falls to 4.1%

US ‌job ​growth accelerated in October and the unemployment rate fell to 4.1%, suggesting that the labor market could be strengthening after stumbling in mid-summer and keeping the Federal Reserve on track to raise interest rates in December. The Labor Department's closely watched employment report on Friday also showed the economy added 84,000 more jobs in August and ‌September than previously reported. The decline in the unemployment rate from 4.2% in September was despite 421,000 people entering the labor force.

The better-than-expected report followed on the heels of data this week showing a rise in job openings in September, which combined with historically low layoffs has raised the specter of the labor market tightening. Economists and US central bank officials have maintained that the labor market poses no inflation risk. "The economy is either at or ‌very near full employment," said Carl Weinberg, chief economist at High Frequency Economics. "We expect the Fed to pivot to focus on the risk of labor demand exceeding labor supply at current levels of demand ‌growth."

Nonfarm payrolls jumped by 165,000 jobs last month after an upwardly revised 60,000 gain in September, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing 65,000 after a previously reported 29,000 increase in September. Estimates ranged from 35,000 to 125,000 jobs. August's employment gains were revised up to 186,000 from the previously estimated 133,000. Last month's broad-based increase in payrolls was led by the professional and business services industry, which added 70,000 jobs, well above the average monthly gain of 15,000 over the past 12 ⁠months.

Healthcare employment ​increased by 42,000 jobs, while the transportation and warehousing sector ⁠added 25,000 positions. Manufacturing payrolls rose by 19,000 jobs, spread across computer and electronic products, machinery and primary metals. The increases are likely linked to the artificial intelligence buildout. There were modest job gains in the retail, financial activities and government sectors.

CONSTRUCTION SHEDS JOBS Construction shed 3,000 ⁠jobs while leisure and hospitality employment dropped by 13,000 positions.

The share of industries reporting growth last month increased to 57.6% from 54.2% in September. Financial markets priced in a roughly 76.8% chance of a rate hike at the US central bank's ​meeting next month, up from 66.9% on Thursday, CME's FedWatch tool showed.

The Fed last week left its benchmark overnight interest rate in the 3.75%-4.00% range. Next Tuesday's consumer inflation report for October could ⁠offer more clues on the course of monetary policy in early 2027. The dollar advanced against a basket of currencies. US Treasury yields rose. Economists estimate the economy needs to create at least 40,000 jobs per month to keep up with growth in the working-age population. The so-called ⁠breakeven ​rate has declined from roughly 150,000 in 2024 because of the smaller labor force.

The unemployment rate declined from 4.2% in September. Household employment, a volatile measure, increased 463,000 in October, more than enough to absorb the people who entered the labor force. But more people worked part-time for economic reasons last month, with the number increasing 339,000 to 4.840 million. Many unemployed also experienced long bouts of joblessness. Despite the surge in payrolls, employment ⁠gains are lagging economic growth, with gross domestic product increasing at a 3.4% annualized rate in the third quarter, fueled by strong consumer spending and businesses aggressively investing in AI.

Economists said employers likely overhired after ⁠the COVID pandemic, and some businesses were probably uncertain about their ⁠staffing needs as they incorporated AI into their operations. They said uncertainty stemming from the US-Israeli war with Iran, which has raised energy prices, was also making employers hesitant to increase headcount. Wage growth maintained its moderate pace, which economists said was a sign that the labor market was not tightening and was not a ‌source of inflation. Wages increased 3.1% ‌in the 12 months through October after rising 3.2% in September. The average workweek was unchanged at 34.4 hours.

(Reporting ​by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci )