U.S. adds 165,000 jobs in October, exceeding forecasts

The U.S. economy added 165,000 jobs in October, surpassing forecasts and signaling a strong labor market that could support a Federal Reserve interest rate increase next month. The unemployment rate fell to 4.1%, lower than expected. Job gains were seen in professional services, healthcare, transportation, and warehousing sectors.

Despite energy-related inflation due to the Iran conflict and concerns about AI-driven job losses, the American labor market has shown resilience. The labor force participation rate increased slightly to 61.9%. Layoffs were low, and job openings were rising. First-time jobless claims also dropped to a 57-year low. Some economists argue that a tightening labor market may not contribute to higher inflation, attributing the rate to factors like immigration crackdowns and retirements.

However, wage growth has slowed, which could strain households facing a cost-of-living crisis. If job market strength continues, Fed policymakers may have room to raise interest rates without harming economic activity. The Fed had already raised rates in September. Markets reacted positively to the jobs data, with a high probability of a 25-basis-point rate hike at the Fed's final meeting of the year.