Robust Hiring Defied Expectations in October, With 165,000 New Jobs -- WSJ

By Justin Lahart

The U.S. added 165,000 jobs in October, in a sign that the labor market could be strengthening.

The numbers

Friday's report from the Labor Department topped economists expectations for a 59,000 job gain. The unemployment rate, meanwhile, slipped to 4.1%. Economists had expected 4.2%.

Job figures for both September and August were revised higher by a combined 84,000. That is a strong indication that the job market has pulled out of its midyear doldrums.

Wages

Average hourly earnings were up 3.1% from a year earlier. That likely marked the seventh month in a row earnings growth fell short of inflation.

What monthly jobs number really means

Economists and policymakers have in recent years put more focus on the unemployment rate than the monthly tally of how many jobs were created. One reason is that the monthly jobs figures can be volatile. It is a tendency that may have been exacerbated by a methodological change the Labor Department made earlier this year in how it counts businesses. The shift, while aimed at damping big annual revisions, might have intensified month-to-month swings.

Additionally, because the level of job growth has been lower than in the past, job-growth volatility is more eye-catching. A move from a gain of 25,000 jobs one month to 100,000 the next, for example, seems like a bigger deal than going from 150,000 jobs to 225,000.

Why unemployment rate matters

Because the combination of an aging population and immigration restrictions has reduced the supply of workers, it is unclear precisely how many jobs the labor market needs to stay steady. So the unemployment rate might be the better measure of whether the job market is cooling down or heating up.

What this means for Fed

Friday's report probably won't alter the Federal Reserve's path on interest rates. Fed policymakers are more focused on inflation, which has remained firmly above their 2% target. It would likely take a sharp deterioration in the labor market to dissuade them from raising rates when they next meet in December.

Fed officials have long been reluctant to put the focus too squarely on any one jobs report. They might be even more cautious now, given uncertainty about precisely how many jobs are needed to keep the unemployment rate low, increased month-to-month volatility, and new Fed Chairman Kevin Warsh's desire to make policy less dependent on short-term data.

Midterm postmortem

Dissatisfaction with the job market -- and the economy overall -- might have been a factor in Democrats' victory over Republicans in this week's midterm elections.

One problem is that wages have struggled to keep up with inflation. In the six months through September, consumer prices rose at a faster clip from a year earlier than average hourly earnings.

The weakness in inflation-adjusted wages, even as the economy has powered ahead, has meant that a smaller and smaller share of economic growth has gone directly to workers. Thursday, the Labor Department reported that the share of nonfarm business output accruing to workers' compensation fell to 53% in the third quarter -- the lowest level in 80 years of data.

Low hire, low fire continues

Another issue is that while layoffs have been low, so has the pace of hiring. That has made it difficult for people trying to break into the job market, such as new graduates. That, alongside worries about what artificial intelligence might do to the labor market, could have been a factor in the large shift in the youth vote toward Democratic candidates. The low-hire market has also made it harder for people to switch jobs -- one of the main ways for workers to get pay jumps.

The good news is that hiring might be thawing. Earlier this week, the Labor Department reported that the hiring rate -- hires as a share of total employment -- rose to 3.4% in September from 3.3% a month earlier. That put it in the upper level of the range it has been stuck in for the past two years.

Photo credit: Patrick T. Fallon/AFP/Getty Images

Write to Justin Lahart at Justin.Lahart@wsj.com

(END) Dow Jones Newswires

November 06, 2026 08:45 ET (13:45 GMT)