US employers add 165,000 jobs as wages fail to keep pace with inflation

American employers created 165,000 new jobs in October, a figure that far exceeded the 65,000 jobs economists had projected. The Labor Department report shows the unemployment rate fell to 4.1% despite 421,000 people entering the labor force. This marks a sharp improvement in hiring conditions for the start of the winter season.

Angelo Kourkafas, a senior global strategist at Edward Jones, described the data as a blowout jobs report. He noted that payroll growth beat forecasts, revisions were positive, and wage growth strengthened. The Labor Department also added 84,000 jobs to its previous counts for August and September, further boosting the year's totals.

The strong job numbers arrive three days after voters gave Democrats full control of Congress. Many Americans cited the high cost of living as a reason for their choice. Despite the political shift, the economic data suggests the labor market remains resilient. The average hourly wage rose 0.4% in October, the largest month-over-month increase since January.

However, the wage gains have not fully offset rising prices. Hourly wages increased by only 3.1% compared to October 2025. This gap means the purchasing power of many workers has declined over the past year. The data highlights a persistent tension between job availability and the actual value of that employment.

Hiring was led by professional and business services, which added 70,000 positions. Healthcare companies hired nearly 42,000 workers, while factories added 19,000 jobs. In contrast, the hospitality sector shed 10,600 positions as hotels, restaurants, and bars cut staff.

The Federal Reserve is likely to view this report with confidence in the labor market's health. This strength may give policymakers the space to focus on persistently high inflation. Wall Street investors currently see a 77% chance of a rate hike at the central bank's December meeting, a jump of about 10 percentage points from Thursday. Brian Bethune, a Boston College economist, expects another rate increase in December and possibly one in early 2027.

Economists describe the current environment as low-hire, low-fire. Employers are reluctant to lay off existing workers but are slow to add new ones. This dynamic makes it difficult for new entrants and those who have lost jobs to find work. The number of new jobs needed to keep unemployment steady has dropped from about 166,000 in late 2023 to just over 5,000 today, according to Yale University’s Budget Lab.

This shift is driven by baby boomer retirements and immigration restrictions, which reduce the pool of available workers. The economy has also shown resilience against shocks like double-digit tariffs on imports and the war with Iran. Gasoline prices have risen above $4 a gallon, straining family budgets. Gross domestic product grew at a 3.4% annual pace from July through September, fueled by consumer spending and investment in artificial intelligence.

Some companies are adjusting their hiring plans in response to technology. Mark Barrocas, CEO of SharkNinja in Needham, Massachusetts, said the company will slow hiring to 5% next year. This is down from 8% to 10% in the previous two years. The firm, which employs 4,200 people globally, has adopted AI tools for product innovation, media planning, and finance. Barrocas said these tools allow staff to focus on higher-impact initiatives rather than tedious tasks.