The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December,
said Kathy Bostjancic, chief economist at Nationwide. US job growth accelerated in October as employers added 165,000 jobs, helping to push the national unemployment rate down to 4.1 percent.
Labor force participation rises as economy adds payrolls
The October employment report from the Labor Department’s Bureau of Labor Statistics showed a broad-based increase in payrolls. This performance followed upward revisions for the previous two months, with the economy adding 84,000 more jobs in August and September than officials had initially reported.
The decline in the unemployment rate from 4.2 percent in September occurred even as more people entered the labor force. Over the past three months, approximately 1.589 million people have joined the labor force, lifting the participation rate to 61.9 percent from 61.6 percent in August. While household employment increased by 463,000 in October, many new entrants—largely re-entrants—have not yet secured work.
Sector-specific trends and AI influence
Growth was led by the professional and business services industry, which added 70,000 jobs. Healthcare employment rose by 42,000, while the transportation and warehousing sector added 25,000 positions. Manufacturing payrolls grew by 19,000, a trend linked by analysts to the ongoing buildout of artificial intelligence infrastructure.
The share of industries reporting growth last month reached 57.6 percent, up from 54.2 percent in September. Despite these gains, some economists remain cautious about the underlying drivers of the current expansion.
Recent improvements in the employment situation largely relate to a major jump in federal government spending in the third quarter, as well as an unprecedented surge in election spending reported to be near $12 billion within a relatively short time frame of August to October,
Brian Bethune, an economics professor at Boston College
Wage growth and the outlook for policy
Wage growth maintained a moderate pace, increasing 3.1 percent in the 12 months through October, compared to a 3.2 percent increase in September. Although this growth is below the pace of inflation, the tightening labor market continues to influence expectations for the Federal Reserve. Financial markets now price in an 80 percent chance of a rate hike at the central bank’s meeting next month, up from 66.9 percent on Thursday, according to CME’s FedWatch tool.
The Federal Reserve last week maintained its benchmark overnight interest rate in the 3.75 percent to 4.00 percent range. Meanwhile, economists continue to track the impact of hiring practices on younger workers.
Earlier coverage: US Manufacturing PMI Rises to 55.5 Percent in October