US Jobs Soar By 165K Blowing Away Estimates; Unemployment Rate Drops Putting Dec Rate Hike Back In Play

In our preview of the October jobs report, we said that the labor data has rarely looked this solid going into a monthly payrolls report: claims near 57-year lows, the lowest October layoffs since 2023, JOLTS openings up 333K and ADP above expectations. If anything, the risk is to the upside of the 63K consensus, and the unemployment rate could well tick down.

Which, as we noted, was the problem as “a strong print gives Warsh, Hammack and Barkin all the cover they need to hike in December, right as the Nasdaq is coming off its worst day since March 2020. Goldman’s rates desk thinks a single print can’t take the hikes out.” We said that we agree with this take, and added that the more likely outcome is a decent number that puts December back in play and adds a rates problem to what has so far been an AI problem. Given where positioning is, CTAs already selling and long-only “frozen (again),” that’s not a recipe for a relief rally.

Well, moments ago, the BLS reported the October jobs and it came extremely red hot, enough to indeed put a December rate hike back on the docket, AI collapse notwithstanding. Here are the numbers:

October monthly payrolls rose by 165K, up more than double the 70K expected bounce, and the third highest print of 2026 (this was once again driven by private jobs, which surged by 159K, smashing expectations of 65K; government only accounted for 6K jobs in October).

The number was so hot it not only printed above the highest Wall Street estimate…

… it was a 5-sigma beat to the median consensus number.

Not only was October red hot, prior month revision were all higher: the August was revised up by 53,000, from +133,000  to +186,000, and September was revised up by 31,000, from +29,000 to +60,000. With these revisions, employment in August and September combined is 84,000 higher than previously 
reported. 

While the payrolls number was red hot, the monthly worker change blew it away, as 463K workers were added according to the Household survey, the third consecutive month of 400K+ workers added…

… which in turn helped the persistently lagging total worker series catch up every closer to the much stronger, in recent years, payrolls series. 

Just as remarkable is that after years of chronic underperformance by full-time jobs, in October the number of full-time jobs soared by 714K, the second highest monthly increase in 2026, while par-time jobs plunged by 242K.

The one blemish in the report was that after a year of declining foreign-born workers, in October we saw 809K foreign-born workers added, the biggest increase since Jan 2025, while native-born workers dropped by 64K.

It wasn’t just the job numbers that came in red hot: the unemployment rate unexpectedly dipped back to 4.1% from 4.2%, and against expectations of an unchanged print.

Among the major worker groups, the unemployment rates showed little or no change in October for adult men (3.9%), adult women (3.6%), teenagers (13.9%), and people who are White (3.7%), Black (6.6%), Asian (2.8 percent), or Hispanic (4.7 percent). 

Both the labor force participation rate, at 61.9%, and the employment-population ratio, at 59.3%, changed little in October. These measures have shown little net change since January.  

And completing the trifecta of hot data was the average hourly earnings which beat expectations both MoM and YoY, with the former printing 0.4%, above the 0.3% expected, and the highest since Nov 2025, while the annual change in earnings disappointed expectations of the first sub-3% print since covid, and instead rose from the pre-revision 3.0% to 3.1% (then again Sept was revised higher to 3.2%).

The average workweek for all employees on private nonfarm payrolls remained at 34.4 hours in October. In manufacturing, the average workweek was unchanged at 40.5 hours, and overtime edged up by 0.1 hour to 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls declined by 0.1 hour to 33.8 hours. 

Some more details from the report:

• The number of long-term unemployed (those jobless for 27 weeks or more), at 2.0 million, changed little over the month. The long-term unemployed accounted for 27.6 percent of all unemployed people. 
• The number of people employed part time for economic reasons increased by 339,000 to 4.8 million in October. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs.
• In October, the number of people not in the labor force who currently want a job changed little at  6.0 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job. 
• Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force changed little at 1.6 million in October. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also changed little over the month at 448,000. 

Looking at the composition of the October jobs print, we find the following: 

• Employment in professional and business services increased by 70,000 in October, well above the average monthly gain of 15,000 over the prior 12 months. In October, employment continued to trend  up in professional, scientific, and technical services (+33,000), in administrative and support and  waste management and remediation services (+28,000), and in management of companies and enterprises (+9,000). Professional and business services has added 269,000 jobs since a recent low in October  2025.
• Health care added 42,000 jobs in October, higher than the average monthly gain of 31,000 over the prior 12 months. In October, employment gains occurred in hospitals (+16,000), home health care services (+11,000), and outpatient care centers (+5,000).
• In October, transportation and warehousing added 25,000 jobs, reflecting growth in couriers and messengers (+17,000) and air transportation (+4,000). Transportation and warehousing has added 104,000 jobs since a recent employment low in February, with couriers and messengers (+71,000) contributing most of the gain.
• Manufacturing employment continued to trend up in October (+19,000) and has increased by 101,000 since a recent low in December 2025. In October, job gains occurred in computer and electronic product manufacturing (+7,000), machinery manufacturing (+4,000), and primary metal manufacturing (+4,000).

Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; wholesale trade; retail trade; information; financial activities; social assistance; leisure and hospitality; other services; and government.

And visually:

Since the numbers were red hot, top to bottom, it was expected that Treasuries dipped as the surge in US job growth led traders to add to wagers that the Federal Reserve will raise interest rates when officials next meet in December. The declines on Friday pushed yields higher across maturities, with those on two-year notes — more sensitive to the outlook for the Fed’s rate path than longer peers — up by as much as seven basis points to 4.54%. The 10-year yield was four basis points higher at 4.87% after data showed the US added 165,000 jobs in October, topping forecasts. 

Traders maintained expectations of further rate hikes from the US central bank, pricing in a 70% chance of a quarter-point rate hike next month. All told, the market expects at least 40 basis points of additional tightening by September 2027, according to Bloomberg.

Developing.