US job growth beats forecasts as strong payrolls raise December rate hike expectations

The US economy added substantially more jobs than expected in October, while unemployment declined and wage growth accelerated, strengthening expectations that the Federal Reserve will raise interest rates again in December.

Friday's report showed that the labor market remains resilient despite elevated borrowing costs, giving policymakers greater room to address persistent inflation pressures.

Payrolls exceed expectations

Nonfarm payrolls increased by 165,000 in October, compared with economists' forecasts of approximately 65,000.

September's employment gain was revised upward to 60,000 from 29,000, while August's figure increased to 186,000 from 133,000.

The revisions added a combined 84,000 jobs to previously reported employment figures.

The unemployment rate declined to 4.1% from 4.2%, while labor force participation edged higher to 61.9%.

Wage growth accelerates

Average hourly earnings increased 0.4% in October, exceeding expectations of 0.3%, while annual wage growth reached 3.1%.

Professional and business services added 70,000 jobs, while healthcare employment increased by 42,000.

The stronger wage figures reinforced concerns that domestic inflation pressures could persist despite recent declines in energy prices.

Markets increase December rate hike bets

Following the report, financial markets raised the implied probability of a 25-basis-point Federal Reserve rate increase in December to approximately 77%, from 67% before the release.

US Treasury yields climbed, with the benchmark 10-year yield approaching 4.88%, while the two-year yield rose toward 4.52%.

The dollar strengthened as traders adjusted their interest rate expectations.

Wall Street faces mixed implications

Stronger employment growth improved confidence in the economy's resilience, supporting some technology stocks following Thursday's sharp selloff.

However, higher Treasury yields could weigh on equity valuations, particularly among growth companies.

The report leaves the Federal Reserve balancing resilient hiring against inflation risks, with November's employment and inflation figures likely to shape its December decision.