US October non-farm payrolls significantly exceeded expectations, creating room for the Federal Reserve to combat inflation.

U.S. October non-farm payroll growth exceeded expectations, with the unemployment rate falling to 4.1%, showing the labor market remains resilient and giving the Federal Reserve (Fed) more room to shift policy focus to inflationary pressures stemming from the Middle East conflict. Data released Friday by the U.S. Bureau of Labor Statistics (BLS) shows non-farm payrolls rose by 165,000 in October, while the September figure was revised up to a 60,000 gain from the initial 29,000, against market expectations of just a 65,000 increase. Economists estimate the U.S. economy needs to create at least 40,000 jobs monthly to keep pace with growth in the working-age population. Due to a shrinking labor force, this so-called "jobs balance level" has dropped from around 150,000 in 2024 to its current level. With layoff rates at historic lows and a sharp recent rise in job openings, this has further fueled expectations that the labor market may be tightening. However, economists and Fed officials have consistently held that the labor market does not pose an inflation risk. Some economists point out that against the backdrop of tightened immigration policies and population retirements, the shrinking labor supply is the main reason for the U.S.'s relatively low unemployment rate.