Blockbuster October jobs report keeps Fed rate hike in play for December

A much stronger-than-expected October jobs report solidifies expectations that the Federal Reserve will raise interest rates in December, as officials are already focused on higher inflation.

The Bureau of Labor Statistics report released Friday showed that 165,000 jobs were created in October , compared with expectations for around 70,000, as the unemployment rate edged down to 4.1%, compared with expectations for 4.2%. That's much higher than the average monthly gain of 48,000 over the past 12 months and well above the roughly 30,000 jobs needed to hold employment steady. Labor force participation inched up to a hair above expectations at 61.9%.

Job gains in both August and September were also revised higher by 84,000. The bulk of jobs added were in the sectors of professional and business services, healthcare, and transportation and warehousing. Manufacturing added 19,000 jobs.

While job gains are picking up, wage growth remains somewhat muted in comparison. Wages grew at 3.1% in October, compared with expectations for 2.9%.

Fed Chairman Kevin Warsh noted these dynamics following the last policy meeting, in which the Fed held rates steady . He pointed to payroll growth that is noticeably above last year's pace, the four-week moving average of unemployment insurance claims that continues to run at the lowest level in generations, and that "on the employment side of the Fed's dual mandate, conditions are quite positive."

"Yet Americans, of course, are still dealing with inflation that has been running above the Committee's objective for close to 6 years," he said. "It's our responsibility to get inflation down. That's the reason the FOMC's discussion over the last couple of days focused mainly on the price stability side of our remit."

Fed officials have noted that the job market is stable in recent comments and have said job growth is not adding to inflation.

Friday's jobs report raises the question of whether that could change if labor market growth continues at a higher pace. One report doesn't make a trend, and officials are not data-point dependent; they're focused on longer-term trends.

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