US economy adds 165,000 jobs in October, far exceeding expectations

Nov 6, 2026

U.S. employers added 165,000 jobs in October 2026, far surpassing forecasts of 65,000, while the unemployment rate fell to 4.1%. Strong payroll expansion in professional services and manufacturing, alongside Q3 GDP growth of 3.4%, underscores economic momentum despite Middle East conflict and high energy prices. Following the report, financial markets priced in a nearly 77% probability that the Federal Reserve will raise interest rates in December to combat persistent inflation.

Headline payroll and unemployment numbers

▪The Bureau of Labor Statistics reported that U.S. nonfarm payrolls increased by 165,000 jobs in October 2026, exceeding economists' expectations of 65,000 job additions
▪The U.S. unemployment rate fell to 4.1% in October 2026 from 4.2% in September 2026, even as 421,000 people entered the labor force
▪The Bureau of Labor Statistics revised combined U.S. nonfarm payroll gains for August and September 2026 upward by a total of 84,000 jobs

Job gains and losses by sector

▪In October 2026, U.S. construction employment dropped by 3,000 jobs while leisure and hospitality employment decreased by 13,000 jobs
▪In October 2026, the U.S. professional and business services sector added 70,000 jobs, healthcare added 42,000, transportation and warehousing added 25,000, and manufacturing added 19,000
▪Manufacturing job gains in October 2026 were concentrated in computer and electronic products, machinery, and primary metals, driven by the ongoing artificial intelligence buildout

Market expectations for Federal Reserve policy

▪Lindsay Rosner of Goldman Sachs Asset Management stated that October's 165,000 payroll figure allows the Federal Reserve to consider raising interest rates in December 2026 without fearing harm to the labor market
▪Following the October 2026 jobs report, financial markets priced in a 76.8% probability of a Federal Reserve interest rate hike at the Federal Reserve's December 2026 meeting, up from 66.9% previously
▪Jeff Schulze of Franklin Templeton Institute stated that the October 2026 jobs report puts renewed pressure on the Federal Reserve to raise interest rates in December
▪The Federal Reserve held its benchmark overnight interest rate in the 3.75%-4.00% range in late October 2026 after initiating its first rate hike in three years in September 2026

U.S. wage and workweek data

▪The average U.S. workweek remained unchanged at 34.4 hours in October 2026
▪Average hourly earnings for U.S. workers increased 3.1% year-over-year in October 2026 and rose 0.4% on a monthly basis

Household employment data

▪The number of U.S. workers employed part-time for economic reasons increased by 339,000 to 4.8 million in October 2026
▪U.S. household employment increased by 463,000 jobs in October 2026, absorbing the influx of new labor force entrants

U.S. economic and hiring trends

▪In 2025, U.S. employers added an average of 9,700 jobs per month, marking the weakest hiring performance outside of a recession since 2002
▪U.S. gross domestic product expanded at a 3.4% annualized rate in the third quarter of 2026, driven by strong consumer spending and corporate investments in artificial intelligence

Break-even job growth estimates

▪Economists estimated that the U.S. economy must create at least 40,000 jobs per month to keep pace with working-age population growth
▪Yale University's Budget Lab estimated that the U.S. economy needs just over 5,000 new jobs per month to maintain a stable unemployment rate due to baby boomer retirements and immigration restrictions

Financial market responses

▪The U.S. dollar advanced against a basket of currencies following the release of the October 2026 employment report
▪The U.S. 2-year Treasury note yield rose to 4.51% following the release of the October 2026 employment report

Economic sentiment in midterm elections

▪The October 2026 employment report was released three days after the 2026 U.S. midterm elections, in which voters gave Democrats control of the U.S. Congress
▪Navy Federal Credit Union chief economist Heather Long stated that the midterm election results reflected voter frustration over an economy causing financial strain