US nonfarm payrolls surge in October pointing to resilient labor market

US nonfarm payrolls rose well above expectations in October signaling that the labor market strengthened further and made the position of the Federal Reserve more comfortable in potential further tightening of the monetary policy.

NFP jumped to 165,000 in October from upwardly revised September’s 60,000 (up from 29,000 that also brightens the outlook) and beat forecasts by 100K.

The same report showed that US unemployment ticked down to 4.1% last month from 4.2% in September, but average earnings rose by 0.4% in October from 0.3% in September / forecast, adding to signals of inflationary pressure.

October data came in much better than expected shape, particularly against the threshold which economists see now at 40,000, needed to keep up with growth, which declined from 150,000 in 2024 to 100,000 and eventually dipped to 40,000, mainly due to smaller labor force, as supply of workers shrank particularly due to an immigration crackdown as well as retirements.

Upbeat October labor data (including job openings and private sector payrolls), along with layoffs at historical lows, contribute to prospects of further tightening in the labor market.

US inflation stands at 3.7%, almost double the Fed’s target, keeping strong market expectations for 25 basis points rate hike in December, after the FOMC left rates unchanged at 3.75%-4.00% range in the policy meeting last week.

After quite satisfactory report from the US labor sector, markets focus on October inflation report (due next week) which could offer more clues on the course of monetary policy in early 2027.