U.S. October nonfarm payrolls far exceed expectations, creating room for the Fed to combat inflation.

November 6 - U.S. nonfarm payrolls growth in October exceeded expectations, with the unemployment rate falling to 4.1%, indicating that the labor market remains resilient and providing more room for the Federal Reserve to shift its policy focus to inflationary pressures triggered by the Middle East conflict. Data released Friday by the Labor Department's Bureau of Labor Statistics showed that nonfarm payrolls increased by 165,000 in October, after September's figure was revised up to an increase of 60,000. The market had expected an increase of only 65,000, while September's initial reading was an increase of 29,000. Economists estimate that the U.S. economy needs to create at least 40,000 jobs per month to keep pace with growth in the working-age population.

Due to a shrinking labor force, this so-called breakeven employment level has fallen from about 150,000 in 2024 to its current level. The layoff rate is at a historically low level, and together with the recent sharp increase in job openings, this has further fueled expectations that the labor market may be tightening. However, economists and Federal Reserve officials have consistently maintained that the labor market does not pose an inflation risk. Some economists point out that, against the backdrop of tighter immigration policy and population retirement, the contraction in labor supply is the main reason for the relatively low U.S. unemployment rate.