US Adds 165,000 Jobs in October as Unemployment Falls

The US Labour Market delivered a stronger-than-expected performance in October, with employers adding 165,000 nonfarm payroll jobs and the unemployment rate declining to 4.1%, according to the latest report from the Bureau of Labor Statistics (BLS), released on November 6.

The increase was considerably higher than economists had anticipated. The stronger figures suggest that the American economy continues to generate employment despite uncertainty surrounding trade policy, elevated living costs and international tensions.

However, the headline numbers do not tell the entire story. Employers remain cautious about expanding their workforces, and people entering the labour market or searching for new jobs continue to face challenges. Wage growth has also struggled to provide sufficient relief from persistent increases in household expenses.

October Job Growth Beats Economists’ Expectations

The addition of 165,000 jobs in October was substantially stronger than the approximately 65,000 positions economists had expected. It also marked a notable improvement from September, when nonfarm payroll employment increased by just 29,000.

The latest figures indicate that hiring gained momentum after a relatively weak September. Revisions to earlier employment estimates also added 84,000 jobs to the combined August and September figures, suggesting that employment growth during those months was stronger than previously reported.

The unemployment rate declined from 4.2% in September to 4.1% in October. The number of unemployed Americans remained around 7.1 million, indicating that the improvement in the headline rate did not eliminate the challenges facing people looking for work.

The October report also showed that approximately 421,000 people joined the labour force. This suggests that more Americans were participating in the job market even as the unemployment rate declined.

Which Industries Created the Most Jobs?

Employment growth in October was spread across several major industries, although some sectors contributed more significantly than others.

• Professional and business services: The sector added approximately 70,000 jobs, making it the largest contributor to monthly employment growth.
• Healthcare: Employment increased by nearly 42,000 positions, continuing the sector’s contribution to overall job creation.
• Manufacturing: The industry added around 19,000 jobs, providing another source of employment growth.
• Leisure and hospitality: The sector recorded a decline of approximately 10,600 jobs, showing that employment gains were not uniform across the economy.

The strength in professional services and healthcare helped offset weakness in parts of the service economy. Manufacturing also recorded an improvement, although the overall employment picture continued to vary considerably by industry.

Why the Labour Market Still Faces Challenges

Despite the stronger October report, the US labour market has experienced a relatively modest pace of job creation during 2026. Employers have added an average of approximately 68,000 jobs per month so far this year.

That is an improvement over 2025, when monthly employment growth averaged only around 9,700 jobs. However, the current pace remains below the average of approximately 166,000 monthly jobs recorded in 2023 and 2024.

The difference highlights how much the employment environment has changed since the post-pandemic hiring boom. During 2021 and 2022, employers added approximately 491,000 jobs per month on average as businesses reopened and demand for workers surged.

Today’s labour market is considerably less dynamic. Companies are generally holding on to existing employees but are not expanding their workforces as aggressively as they did during the recovery period.

What Does a Low-Hire, Low-Fire Labour Market Mean?

Economists have described the current employment environment as a low-hire, low-fire labour market. This means businesses are relatively reluctant to dismiss existing workers but are also cautious about recruiting new employees.

For people who already have stable jobs, the situation can provide a degree of security. Workers are less likely to face widespread layoffs when companies prefer to retain their existing staff.

However, the same conditions create difficulties for jobseekers. Young people entering the workforce, recent graduates and employees who have lost their previous jobs may find fewer opportunities to secure new positions.

Companies can maintain their existing operations without significantly increasing headcount, particularly when economic uncertainty makes long-term staffing decisions more difficult. This can leave jobseekers competing for a limited number of vacancies even when overall unemployment remains relatively low.

Why the US Economy Needs Fewer New Jobs to Maintain Employment Stability

Another important factor behind the employment figures is the changing size and composition of the US labour force. The economy does not necessarily need to create as many jobs as it did several years ago to keep the unemployment rate stable.

Retirements among older Americans and slower growth in the working-age population have reduced the number of people entering the labour market. Changes in immigration have also affected the supply of available workers.

This means the number of new jobs required to absorb additional workers has declined. Estimates from Yale University’s Budget Lab, drawing on earlier Federal Reserve research, have placed the monthly employment growth needed to keep unemployment stable at just over 5,000 jobs.

That estimate is substantially lower than the approximately 166,000 monthly jobs considered necessary in late 2023. It also helps explain why relatively modest employment growth can coexist with a stable unemployment rate.

However, a lower employment growth requirement does not mean that jobseekers are necessarily finding work easily. The availability of vacancies, the skills employers demand and competition for particular positions remain important factors.

Wage Growth Remains a Concern for American Workers

While employment increased in October, household purchasing power remains a major economic concern. Rising prices for everyday goods and services have made it difficult for many Americans to feel the benefits of employment and wage growth.

Average hourly earnings increased by 3.1% over the 12 months through October, according to the latest employment report. Although nominal wages continued to rise, their purchasing power depends on how quickly consumer prices increase.

Inflation-adjusted earnings had declined for six consecutive year-over-year readings through September. This means that the increase in workers’ pay had not kept pace with inflation over that period.

The difference between nominal wage growth and real wage growth is important. A worker may receive a higher salary than a year earlier but still be able to afford fewer goods and services if prices have increased faster.

Consequently, the improvement in employment figures does not automatically translate into stronger financial conditions for every household.

Economic Growth Supported by Consumer Spending and AI Investment

The US Economy has remained resilient despite several sources of uncertainty. Gross domestic product increased at an annualised rate of 3.4% between July and September, supported by consumer spending and investment in artificial intelligence.

Consumer spending remains an important driver of economic activity because household purchases support businesses across retail, services, travel and other industries. Continued spending has helped sustain demand even as Americans face higher living costs.

Investment in artificial intelligence has also become an important source of economic activity. Businesses are spending on computing infrastructure, data centres, software and related technologies as they expand their use of AI.

However, strong Economic Growth does not necessarily mean that employment opportunities will increase at the same pace. Companies can invest heavily in technology and expand production without making equivalent increases in staffing.

This gap between economic output and employment growth is one reason economists are paying close attention to the quality and distribution of job creation.

Trade Policy, Iran Conflict and Rising Household Costs

Businesses have also been operating amid uncertainty surrounding the Trump administration’s trade policies and international developments.

Import tariffs can increase costs for companies that depend on foreign materials, components and finished products. Businesses may respond by absorbing some of those expenses, raising prices or reconsidering investment and recruitment plans.

The conflict involving Iran has added another source of economic uncertainty through its impact on energy markets. Higher gasoline prices can place additional pressure on household budgets and increase transportation costs for businesses.

These pressures can influence consumer spending and corporate decisions even when the broader economy continues to expand. For employers, uncertainty about future costs and demand can make hiring commitments more difficult.

What the October Jobs Report Means for the Federal Reserve

The stronger employment figures could influence how the Federal Reserve evaluates the US economy and its interest-rate policy. A labour market that continues to create jobs may give policymakers less reason to prioritise employment support over inflation control.

However, employment is only one part of the Federal Reserve’s assessment. Inflation, consumer spending, economic growth and financial conditions also influence decisions about borrowing costs.

The October report therefore does not automatically determine the direction of future interest rates. Policymakers will need to examine additional economic data before deciding whether monetary policy should remain restrictive or become more supportive of growth.

For businesses and consumers, the balance between employment stability and inflation will remain important. Higher borrowing costs can affect mortgages, business investment and consumer credit, while persistent inflation can reduce household purchasing power.

US Job Market Outlook: Stronger Numbers, but Uneven Opportunities

The October employment report offers encouraging evidence that the US labour market has not weakened as sharply as some economists feared. The addition of 165,000 jobs and the decline in unemployment to 4.1% indicate that businesses are still creating employment opportunities.

Nevertheless, the broader picture remains mixed. Average monthly job creation is relatively modest compared with recent years, hiring remains cautious, and younger workers and displaced employees continue to face difficulties finding suitable positions.

Wage growth also remains an important concern because employment gains alone cannot guarantee that households will experience an improvement in their living standards.

The next challenge for the US economy will be sustaining job creation while controlling inflation and maintaining business confidence. October’s stronger figures provide a positive signal, but several more months of employment data will be needed to determine whether the improvement represents a lasting change in the labour market or a temporary rebound after September’s weak performance.