Employers Add 165,000 Jobs in October, Crushing Forecasts as Unemployment Falls to 4.1%

U.S. employers added 165,000 jobs in October, far more than the 65,000 economists had forecast, and the unemployment rate fell to 4.1%, the Labor Department reported Friday. The Associated Press called it a surprisingly strong showing for a hiring market that has spent much of the past two years in a slump.

The unemployment rate dropped even though 421,000 people entered the labor force, a sign that more Americans were looking for work and finding it. The department also revised its estimates for August and September upward by a combined 84,000 jobs. Average hourly earnings rose 0.4% from September, the biggest monthly gain since January, and were up 3.1% from a year earlier. Even so, wages have now lagged inflation for seven straight months.

Professional and business services led the gains with 70,000 new jobs. Health care added nearly 42,000 and factories added 19,000. Hotels, restaurants and bars shed 10,600 jobs. "This was a blowout jobs report," said Angelo Kourkafas, senior global strategist at Edward Jones, pointing to the combination of payroll growth, upward revisions, a falling jobless rate, improved participation and stronger pay.

The report fits a broader picture of an economy that has absorbed a string of shocks. President Donald Trump's double-digit import taxes and the war with Iran, which pushed U.S. gasoline above $4 a gallon, have squeezed households. Still, the economy grew at a 3.4% annual pace from July through September, powered by consumer spending and investment tied to artificial intelligence. Job growth this year has averaged 86,000 a month, a sharp pickup from 9,700 a month in 2025, which the AP described as the weakest non-recession performance since 2002. For comparison, hiring averaged 166,000 a month in 2023 and 2024 and 491,000 a month during the 2021-22 boom.

Economists say the arithmetic of the labor market has changed. A Yale Budget Lab estimate that drew on a Federal Reserve report puts the "break-even" pace of job growth needed to hold unemployment steady at just over 5,000 a month, down from about 166,000 in late 2023. Baby boomer retirements and the administration's immigration crackdown mean fewer people are competing for jobs. The result is what many economists call a "low-fire, low-hire" market, in which employers hold on to workers but are slow to add them, making it hard for young people and the newly unemployed to land jobs.

For the Federal Reserve, a strong report complicates matters. Markets put the chance of a rate increase at the central bank's December meeting at 77%, up about 10 percentage points from a week earlier, according to the CME FedWatch tool. Inflation has been fueled by the Iran war's effect on energy prices, and a hotter jobs market gives policymakers more reason to lean toward tightening.

The report arrived three days after midterm elections in which Democrats won full control of Congress with voters citing the cost of living, and one day after a rout in AI-linked stocks sent the Nasdaq into a correction. The next jobs report, for November, is due December 4.