Strong October Jobs Report Gives Fed More Reason to Consider Rate Hike

A stronger-than-expected US employment report has revived expectations that the Federal Reserve could raise interest rates at its December meeting, reversing some of the market's earlier bets on a rate cut or pause following the recent technology-stock selloff, Jared Blikre reported for Yahoo Finance.

A stronger-than-expected US employment report has revived expectations of a possible Federal Reserve interest-rate increase in December.

The October employment report showed that US employers added 165,000 jobs, more than double the forecast cited in the market commentary.

The unemployment rate changed little, remaining at 4.1 percent.

The report also showed that employment figures for the previous two months were revised higher. August payroll growth was revised from 133,000 to 186,000, while September's increase was revised from 29,000 to 60,000. Average hourly earnings rose by 0.4 percent in October.

The stronger figures prompted traders to reassess the likelihood of a Federal Reserve rate increase at its December 8–9 meeting.

According to the Polymarket figures cited by Yahoo Finance, the implied probability of a quarter-point hike rose to approximately 78 percent after falling to about 64 percent during Thursday's market selloff.

The report was encouraging for job seekers and suggested that the labor market remained more resilient than some investors had expected.

However, stronger employment and wage growth could also make it harder for the Federal Reserve to justify easing monetary policy if inflation remains elevated.

“With a number like this, you can put aside labor as a concern,” Interactive Brokers chief strategist Steve Sosnick said on Yahoo Finance's “The 8:30.”

That leaves inflation as a central consideration for policymakers, who must balance their mandate to support employment with their responsibility to maintain price stability.

The employment market may also require fewer new jobs to remain stable than in previous decades. Baby boomers are retiring, while slower immigration has reduced the growth of the available workforce.

RSM chief economist Joe Brusuelas estimated that the US economy needs only about 35,000 additional jobs a month to maintain labor-market stability.

He told Yahoo Finance's “Market Hang” that October's job growth was more than three times that level.

Meanwhile, a decline in stock prices could eventually help moderate spending by wealthy households.

Economists refer to the tendency of households to spend more when their investments and assets rise in value as the wealth effect.

“To the extent that higher rates also take a little steam off of equity prices, that can cool inflation by the most affluent households,” KPMG chief economist Diane Swonk said on “The 8:30.”