FX.co ★ US nonfarm payrolls: 165,000 new jobs despite grim forecasts

The US labor market surprised market participants by showing unexpected resilience. The US economy added 165,000 jobs in the public and private sectors in October, while the consensus had expected a modest 65,000. Besides, the Bureau of Labor Statistics upgraded the data for the previous two months, adding another 84,000 jobs.

Contrary to fears of mass layoffs due to AI adoption and soaring oil prices, companies continue hiring in healthcare, logistics, and business services. The unemployment rate fell to 4.1%, and initial jobless claims plunged to a 57-year low. Fed officials attribute this labor shortage to demographics and the Trump administration’s tight immigration restrictions — there are simply fewer available workers in the market.

However, wages are not keeping pace with strong hiring. Average hourly earnings’ growth slowed to 3.1% year-on-year (vs. 3.8% in February). On the one hand, this eases inflationary pressure. On the other hand, it hits Americans’ wallets, making it harder for households to cope with the cost-of-living crisis.

For the Federal Reserve, this data was a green light. CIBC Capital Markets analysts believe the economy is close to full employment. That gives the regulator room to act: markets estimate the probability of a 25-basis-point hike in the funds rate in December at 75%. Even the recent tech-sector crash failed to change those expectations — a strong labor market proved more important than stock market fears around artificial intelligence.