US nonfarm payrolls increased by 165,000 in October, well above the +65,000 consensus, in a report that beat expectations across nearly every major measure. The nonfarm payrolls release — the US government's monthly tally of hiring on business payrolls — is one of the most closely watched reads on the labor market and a key input for Federal Reserve policy.

The prior month was revised up to +60,000 from the +29,000 initially reported in September's report, for a two-month net revision of +84,000. Private payrolls rose 159,000 versus +64,000 expected, and September's private figure was revised from +46,000 to +78,000. Manufacturing added 19,000 jobs against a +5,000 forecast, and government payrolls rose 6,000 after falling 17,000 previously. The household survey, which counts employed individuals rather than payroll jobs, showed employment gains of 463,000.

The unemployment rate fell to 4.1% from 4.2%, ahead of expectations for an unchanged 4.2%. Unrounded, it stood at 4.141% versus 4.1753% prior. The participation rate, the share of Americans working or actively seeking work, rose to 61.9% from 61.8%, while the U6 underemployment rate climbed to 7.9% from 7.6%. U6 is the broadest official measure of labor underutilization, adding discouraged workers and involuntary part-timers to the headline unemployment count.

Wage growth also topped forecasts. Average hourly earnings rose 0.4% month over month versus +0.3% expected and were up 3.1% year over year against +2.9% expected. Average weekly hours held at 34.4, in line with estimates. Pay gains are among the indicators Fed officials monitor for signs of building price pressures.

Analysts called the release "a beat from bottom to top" and said the wage growth will make the Federal Reserve "look twice." With one more jobs report due before the December 9 FOMC meeting — the rate-setting session where officials vote on interest rates — they argued it makes a rate hike more likely. That upcoming report will be the final payroll print the committee receives before it gathers.

The main hint of weakness was the rise in U6. Part-time employment for economic reasons jumped by 339,000 to 4.84 million, with nearly all of the increase — 356,000 — attributed to "slack work or business conditions," indicating employers are cutting hours. The category captures workers whose schedules were reduced or who could not find full-time work, making it a closely tracked gauge of labor market slack.

US 2-year yields rose 4.5 basis points on the day to 4.52%, and USD/JPY gained 72 pips to 158.38. Short-dated Treasury yields are particularly sensitive to expectations for Fed policy, making them a common barometer of how markets digest jobs data. S&P 500 futures held slightly higher, with commentary suggesting equities were focused on factors other than macro data.

September's across-the-board softness means October's strength does not necessarily signal momentum, but the report shows no clear signs of deterioration, especially as most pre-NFP jobs data for October was also strong.

The construction sector showed a split between data centers and everything else. Nonresidential specialty trade contractors added 101,000 jobs year over year, while residential specialty contractors lost 36,000, including 15,200 in October alone. Data center construction has expanded in recent years alongside cloud and AI infrastructure spending, while residential building is highly sensitive to borrowing costs. The analysis noted that higher rates won't help unwind that divergence.