The US economy added 165,000 jobs in October and the unemployment rate fell

Job growth surpassed expectations in October, new data showed Friday, with the US economy adding 165,000 jobs. The unemployment rate fell to 4.1% from 4.2%, according to Bureau of Labor Statistics data. Job growth in the previous two months was stronger than initially reported, with a total of 84,000 jobs added: August was revised upwards by 53,000 to 186,000; and September gains totaled 60,000, up from 29,000. The consensus forecast for October called for monthly gains of 65,000 jobs and a 4.2% unemployment rate, FactSet estimates show. Friday’s report well exceeded those expectations and painted a picture of a labor market that’s not just resilient and stable – but one that’s robust. “Today’s jobs report is a strong rebuttal to fears that the economy is heading into a meaningful slowdown,” Seema Shah, chief global strategist at Principal Asset Management, wrote Friday. Through October, job growth is averaging 86,100 per month. That’s a breath of fresh air from the sub-10,000 jobs per month added last year; still, the gains this year are still running below 2024 and pre-pandemic levels, when monthly job gains averaged roughly 120,000. However, when looking at recent months, the pace of job growth is looking much more formidable: Barring future revisions, the three-month average for US employment gains is 137,000 jobs, BLS data shows. The unemployment rate has been at or under 4.5% for a record 60* months in a row (*the BLS did not report an unemployment rate for October 2025 due to the government shutdown). Beyond the stronger-than-expected headline numbers, Friday’s report also showed that job growth occurred across a broader suite of industries. The bulk of October’s gains occurred in the professional and business services sector, which added 70,000 jobs. The healthcare and social assistance industry, which has kept the labor market afloat in recent years, added 55,100 jobs last month. Other solid gains were reported in durable goods manufacturing (+25,000), a sector that’s been boosted in part by AI-related investment; transportation and warehousing (+24,500), a sector that’s gearing up for the holiday shopping season; and temporary help services (+18,600), a “canary in the coalmine” sector that shows employers might be testing the waters before making a permanent hire. Tyler Schipper, associate professor of economics at St. Thomas University in Saint Paul, Minnesota, cautioned that some of those categories have been “noisy” in recent months. Still a low-churn environment The burst of optimism, however, comes with some caveats. “Part of my hesitance comes from, if we look at the three-month average of job growth right now, it’s pretty similar to where it was earlier in the year,” he said. “And then it dropped back down pretty dramatically over the summer and the early fall.” “So, is this the beginning of a trend, or are we going to see what we saw earlier this year, where things pick up and then they drop off a little bit,” he added. The recent months’ job gains as well as Indeed’s job postings in September, which notched the first year-over-year gain in four years, are certainly encouraging data points, he said; however, those don’t decisively change the trajectory of a slow-churn labor market that’s been firmly entrenched in a “low-hire, low-fire” state for years. It’s been a labor market that’s worked for some but not all, especially younger workers and unemployed Americans looking to reenter the labor market. In October, unemployment duration rose to its highest level since December 2021, he said. “But even workers who have jobs, they’re maybe not losing those jobs, but they’re also potentially having a hard time right now, because wage growth has been pretty mild, especially relative to inflation,” he said. In October, wage growth slowed on an annual basis to 3.1% from an upwardly revised 3.2%. Americans’ pay gains are hovering around pre-pandemic levels; however, inflation is not: Prices have been rising faster in recent months, driven higher by a war-driven energy shock. The cost of living remains a major concern for households, while employers are navigating demographic shifts, the rapid adoption of AI, persistently elevated inflation and the war with Iran. And a job market that appears healthy does not necessarily feel that way to workers. The better-than-expected hiring offers some reassurance for an economy entering a new political chapter after the Democrats’ sweep in the midterm elections.