U.S. Adds 165,000 Jobs in October, Bringing Rate Hikes Back Into December Debate
Key Facts
The U.S. economy added 165,000 nonfarm jobs in October, according to the Bureau of Labor Statistics report released on November 6, a reading that brought the possibility of a rate hike back into market discussion ahead of the Federal Reserve’s December meeting. The unemployment rate fell to 4.1% in October from 4.2% in September, reinforcing signs that the labor market remains resilient. Fitch analysts said, according to a Reuters report, that resilient hiring keeps the Fed focused on inflation and shifts the debate toward a December increase. The report cited Raymond James analysts as expecting a 25-basis-point rate hike that month. But the jobs data do not settle the decision, as a new inflation reading and the Fed’s review of the full range of economic information will come before the meeting.
The October reading came with upward revisions to the previous two months. The Bureau of Labor Statistics raised its estimate of jobs added in August to 186,000 from 133,000, and also raised its estimate for September to 60,000 from 29,000. Together, employment in the two months was revised up by 84,000 jobs from the previous estimates. The revisions show that the labor market was stronger than the initially published figures suggested, explaining why the prospect of tightening returned to trading after the timing of a hike had receded. On November 5, a Reuters report said interest-rate traders had pushed back the timing of the next expected increase to March 2027, and markets were not fully pricing in a hike before that month.
Wage details showed labor costs continuing to rise: average hourly earnings for private-sector, nonfarm workers increased by 14 cents, or 0.4%, in October to $38.00. On a year-over-year basis, average hourly earnings rose 3.1% over the 12 months ended in October. The monetary policy committee monitors wages as part of its assessment of price pressures, alongside employment and inflation indicators. In its October statement, the committee said inflation remained elevated. It added that the accumulation of further information would help it determine the appropriate policy stance to return inflation to its 2% goal in a timely manner.
The jobs report came amid clear pressure on technology stocks in the previous session. On November 5, the Nasdaq fell 5.5%, and the Philadelphia Semiconductor Index dropped 12%, its second-largest decline on record, according to a Reuters report. Technology and artificial intelligence stocks led the sell-off, while the report said the technology sector fell 7.3%. Even so, expectations of a rate hike returned to market focus after the employment data were released. St. Louis Federal Reserve President Alberto Musalem said on November 6 that inflation remained the main concern for businesses he had spoken with in his Midwest district.
Musalem linked lower inflation to growth and employment, saying the best thing that could be done to support them was to reduce inflation in a timely manner. He also said AI investment was still contributing to inflation, and that monetary policy should respond to current economic conditions, not what they might be five years from now. Daly said in an interview with Reuters on October 14 that the Fed would likely need further adjustments, but added that their timing remained under discussion and that she saw no urgency to make a decision based on limited information. In another interview dated October 6, she linked the need for further increases to continued shocks from tariffs, oil and AI, or their overlap. She added that AI demand for chips could add to inflationary pressures.
Attention now turns to the October Consumer Price Index, scheduled for release on November 10 at 8:30 a.m. Eastern time, according to the Bureau of Labor Statistics. The report comes ahead of the Federal Open Market Committee meeting scheduled for December 8 and 9. The December meeting will include a Summary of Economic Projections, along with a monetary policy decision. Policymakers will weigh persistently elevated inflation against labor-market indicators, including the October reading and revisions to August and September. The Fed’s October statement said additional information would help the committee determine the appropriate stance to achieve a return of inflation to its goal.