US hiring rebounds: 165,000 jobs in October, three times the forecast

What happened

US employers added 165,000 jobs in October, the Bureau of Labor Statistics said on 6 November, far above the roughly 56,000 to 59,000 economists had expected. Earlier months were revised up: September to 60,000 from 29,000, and August to 186,000 from 133,000, adding 84,000 jobs in total. Over the past three months, payrolls have grown by about 137,000 a month on average.

The unemployment rate fell to 4.1% from 4.2%. Average hourly earnings rose 0.4% in October, more than forecast, and 3.1% over the year. More people joined the labour force, with the participation rate rising to 61.9%.

Why the revisions matter as much as the headline

The first estimate of payrolls comes from a survey of employers that is not complete when it is published. As more responses arrive, the figure is revised in each of the next two months. That is why a weak month can turn out less weak: September's 29,000, which looked like a near-stall, is now 60,000. It also fits what the job-turnover survey showed earlier this week, when openings rose to 7.5 million and quits jumped (our story).

Real wages: pay is still behind prices

Pay rose 3.1% over the year, while consumer prices rose 3.7% in September. When wages grow more slowly than prices, the real value of pay falls: workers can buy less with what they earn. That squeezes spending. But for the Federal Reserve, faster monthly pay growth, like October's 0.4%, can signal that firms are starting to raise wages to keep up, which can keep inflation high.

Where it sits in the chain

This is Link 5, the real economy, feeding back into Link 2: a firm job market and rising pay make it harder for the Fed to ignore inflation of 3.7%, even after a sharp fall in share prices. The Fed held its rate at 3.75–4% on 28 October, with two officials voting for a rise.

What to watch

• US inflation for October, due later this month.
• Whether markets raise the odds of a Fed rate rise in December again after this week's stock sell-off.
• The Fed's decision in December.