The U.S. economy created 261,000 jobs in October, the Labor Department reported on Friday, exceeding expectations and showing just how strong the labor market remains despite rising interest rates and high inflation.
Economists had expected the U.S. economy gained 200,000 jobs last month. The unemployment rate increased slightly to 3.7%, compared with 3.5% in September and the 3.6% consensus call among analysts surveyed by FactSet.
Job growth likely cooled slightly in October as U.S. employers added jobs at a slower but still-healthy pace. That would reflect continued strength in a labor market that has so far proved remarkably resilient at a time of rising interest rates and higher prices.
Economists forecast that the U.S. economy added 200,000 jobs last month, consensus expectations show, which compares with 263,000 jobs added in September. October would mark the third straight month of declines in the pace of job growth. It would also bring the number of jobs created over the month to the lowest level since December 2020, when the economy shed jobs.
That pace of job growth would still show significant strength in labor demand, even though the economy has begun to offer signs of broader slowing. Economists expect the unemployment rate to hold steady at 3.5% in October, matching its September rate and prepandemic low.
A jobs report roughly in line with consensus expectations will do little to convince the Federal Reserve that the labor market is beginning to cool, particularly because it will cap off a week of fresh jobs data that showed strength across the board. A survey released by the payroll processing company ADP on Wednesday estimated 239,000 jobs were added in October, well above expectations for 185,000 jobs.
And a government report released Tuesday showed job openings increased in September to 10.6 million, up from 10.1 million the month before—a sign of rising labor demand. “This looks like a job market that’s ramping up, not slowing down,” Layla O’Kane, a senior economist with Lightcast, said this week after the openings data was released.
That poses a problem for the Fed, which wants to see dramatically less activity in the labor market as it attempts to tackle rising inflation. Chairman Jerome Powell told reporters on Wednesday that he believes the labor market is “overheated” and that he wants to see job openings and quits falling significantly.
“We keep looking for signs that sort of the beginning of a gradual softening is happening,” Powell said at a press conference. “Maybe that’s there, but it’s not obvious to me.”
One data point worth keeping an eye on in Friday’s report: wages. Average hourly earnings have climbed roughly 0.3% in each of the past two months, and economists expect a similar pace of wage increases for October. The Fed doesn’t want to see wages leveling off at that pace, however; Powell was clear on Wednesday that he would rather see them start to come down.