US Labor Market Beats Forecasts: What 165,000 New Jobs Mean for the Fed and Stock Markets

The U.S. labor market is showing itself to be noticeably more resilient in the fall of 2026 than many market observers had expected. According to the U.S. Bureau of Labor Statistics (BLS), 165,000 new nonfarm jobs were created in October — well above the forecast of 65,000 jobs. At the same time, the unemployment rate edged down to 4.1 percent. This development underscores the continued resilience of the world’s largest economy, while also dampening expectations for rapid and aggressive interest rate cuts by the U.S. Federal Reserve.

Significant increase in job creation and positive revisions

With 165,000 newly created jobs, the result exceeded consensus estimates by 100,000 positions. In addition, the data for the previous months were revised significantly higher: employment growth for August was revised from 133,000 to 186,000, and the September figure was raised from 29,000 to 60,000 jobs. Together, this results in a positive net revision of 84,000 jobs for those two months. The three-month average therefore rose to 137,000 jobs per month. Employment growth was concentrated particularly in professional services (+70,000) and health care and social assistance (+42,000), while slight declines were recorded in the hospitality sector.

A setback for expectations of faster rate cuts

For the U.S. Federal Reserve, the unexpectedly strong labor market reduces the pressure to continue lowering interest rates quickly. Average hourly earnings rose by 0.4 percent in October from the previous month to $38.00, which corresponds to an increase of 3.1 percent year over year. A stable labor market combined with moderate wage growth supports private consumption as a central pillar of the U.S. economy, but it also carries the risk of persistent inflationary pressures. For the Fed, this increases the room for a wait-and-see stance with higher interest rates for longer.

Effects on stocks, bonds and the U.S. dollar

The macro data send mixed signals to financial markets. On the one hand, the fundamental strength of the U.S. economy reduces recession worries and supports earnings prospects for broad indices such as the S&P 500, Dow Jones and MSCI World. On the other hand, the scenario of interest rates staying higher for longer weighs on interest-rate-sensitive sectors such as real estate, utilities and high-growth technology stocks in the Nasdaq Composite. Rising yields on U.S. government bonds make fixed-income securities more attractive again relative to low-dividend growth stocks, while at the same time supporting the U.S. dollar, which can create positive currency effects for euro-based investors in U.S. stocks.

The latest U.S. labor market report is taking some of the wind out of recession concerns for now. For private investors, attention is shifting more strongly to the path of interest rates. The upcoming November inflation data and the Fed’s December policy meeting are the next key reference points for global equity and bond markets.