Massive Job Gains of 165,000 in October Bolster Case for More Fed Rate Hikes

by Snejana Farberov

skyline-of-jacksonville

Following a disappointing September, U.S. payrolls came roaring back in October as employers went on a hiring spree, adding 165,000 new jobs and pushing the unemployment rate down to 4.1%. 

The latest report from the Bureau of Labor Statistics, released Friday, shows nonfarm payroll growth more than doubled initial forecasts.

These stronger-than-expected job figures increase the likelihood that the Federal Reserve will remain laser-focused on inflation and raise interest rates in the coming months.

CME FedWatch currently prices a roughly 77% chance of the Federal Open Market Committee (FOMC) raising the federal funds to a 4%-4.25% range in December, followed by a 65% probability in January.

"After last month’s hot inflation print put the next increase in ‘when’ not ‘if’ territory, a soft jobs report was the one thing that could have complicated December," says Realtor.com® senior economist Jake Krimmel. "If Fed hawks were waiting to exhale, they can do so now."

Work sectors that saw the strongest growth in October included professional and business services, which added 70,000 in jobs, well above the average monthly gain of 15,000 over the past 12 months.

Health care came a distant second, with 42,000 payrolls added, followed by transportation and warehousing (+25,000 jobs), and manufacturing (+19,000).

Meanwhile, the September employment data was revised up by 31,000 jobs, from +29,000 to +60,000, while the employment in August was revised up by 53,000, from +133,000 to +186,000.

With these revisions, employment across these two months combined was 84,000 higher than previously reported.

While calling the latest jobs data "impressive," Krimmel points out that the market is still in a low-hire, low-fire mode overall. However, he says that October's payroll surge could be signaling "some green shoots on the hiring side."

"The numbers could still be revised, of course, and the trend matters more than any one point; but you don’t get a good trend without a good month," adds Krimmel.

What this means for homebuyers

For homebuyers, Krimmel says that a more dynamic labor market offers some support; however, to meaningfully improve Americans' purchasing power and boost demand requires wage growth to surpass inflation.

Friday's jobs report showed nominal annual wage growth of 3.1% in October, trailing September's 3.7% inflation rate.

"Nominal wage growth is necessary but not sufficient for real wage gains in this environment, so inflation has to come back down, too," says the economist.

Mortgage rates chart November 5, 2026
(Realtor.com)

The major wildcard remains the ongoing war in Iran, which has driven up inflation and pushed mortgage rates above 7%.

In this week's midterm elections this week, U.S. voters made it known that they were dissatisfied with the state of the economy by handing Democrats control of the House and Senate while flipping multiple traditional Republican strongholds, including Texas, South Carolina, and Kansas.

Even so, Krimmel says that the results of the elections are unlikely to change much for the housing market in the short run.

"Getting back to 'normal' in many metros takes more activity, which depends on improved buying power to bring buyers off the sidelines," he concludes.

Keith Francis

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