Employment gains lock in December rate hike

November 6, 2026 Payroll employment rose by 165,000 in October, blowing past expectations with sharp upward revisions to September and August. Public sector payrolls accounted for just 6,000 of those gains. An 8,000 job increase in state payrolls offset small losses at the local and federal levels.

Gains were concentrated in education, with a small increase in the U.S. Postal Service. Professional and business services led private sector gains, adding 70,000 jobs.

Temporary help services added 18,600. Next were management, scientific and technical consulting services, which added 17,300. Those gains likely reflect efforts to scale AI models.

The rest were scattered across the sector. Healthcare and social assistance added 55,100 jobs, the sector’s largest gain since April. Individual and family services added 16,400 – including home health and personal care aides, counselors and preschool workers.

Hospitals added 16,000, while home healthcare services added 10,500. Those gains reflect an aging population and demand for in-home eldercare, where worker shortages are severe. Some reflect efforts to replace foreign-born workers who lost their Temporary Protected Status (TPS).

Florida was among the states hardest hit by those losses. The courts ruled against the administration’s suspension of TPS for Venezuelan workers, effective today. Transportation and warehousing added 24,800 jobs, concentrated in couriers and messengers, which added 17,400.

Online retailers’ promotions to juice spending helped fuel those gains. A decline in truckers who reside in other countries – largely Mexico and Canada – has thinned the supply of drivers. Retail trade added 6,000 jobs, with gains concentrated in clothing stores, department stores and big-box discounters.

GLP-1 drugs are buoying spending at clothing stores and resale shops. Building material and garden stores shed 15,400 jobs, the largest loss since January 2026. Those losses reflect the ongoing housing recession.

Manufacturing added 19,000 jobs, all in durable goods. Gains were broad, marking the sector’s fifth consecutive increase after losses in April and May. Construction shed 3,000 jobs.

Losses were concentrated in residential construction, which competes with data centers for the same skilled tradespeople. Nonresidential construction and specialty trades linked to data centers and high-tech manufacturing added jobs. Leisure and hospitality shed 13,000 jobs, mostly in restaurants and bars.

In February 2026, the National Restaurant Association reported that 42% of restaurants surveyed had failed to turn a profit in 2025. The association predicted a surge in restaurant closures in 2026. Information and mining shed 1,000 jobs each.

Losses in information were concentrated in publishing. Average hourly earnings surged 0.4% in October, following a sharp upward revision to September. That translates to a 3.1% annual gain, still expected to trail inflation for the month.

That gap helps explain why consumer attitudes and spending have decoupled. More paychecks and wealth effects are lifting aggregate spending, even as individuals continue to lose ground to inflation. The electorate noticed in the midterms.

The strongest wage gains showed up in the goods producing sector, led by a 0.9% monthly increase in construction. Hyperscalers’ ability to lock in lucrative, long-term contracts with plenty of sweeteners has bid up construction wages. Those wages have risen 4.7% from a year ago, the fastest pace since June 2024.

Construction is one of the few sectors where wage growth is accelerating rather than slowing. Average hours worked held steady at 34.4. Separately, the unemployment rate fell back to 4.1%, its lowest level since July.

The drop would have been larger given the low breakeven pace of job gains needed to hold unemployment steady, but labor force participation rose to 61.9%, its highest level since March 2026. Participation gains were broad-based across most groups. The unemployment rate for new college graduates fell to 5.2% in September, according to the New York Federal Reserve’s calculation, which is released with a lag.

That remains high relative to overall unemployment. Underemployment among new graduates surged to its highest level since 2020. The U-6 rate, which includes discouraged workers and those forced to accept part-time rather than full-time jobs, jumped to 7.9%.

The increase was driven by workers accepting part-time jobs for economic reasons, including new college graduates. That rate is well above pre-pandemic levels. It is one of many reasons the labor market looks better on paper than it feels to most Americans.

The ranks of the long-term unemployed (more than 27 weeks) edged up to 1.96 million, the highest level since May. Low unemployment has not erased the stigma of long-term joblessness. Those workers are becoming discouraged and have exhausted their unemployment insurance benefits.

The duration of unemployment ticked up, underscoring the problem. The unemployment rate has held at or below 4.5% for a postwar record of 59 months, surpassing the 57-month record at the end of the 1960s boom. That earlier period included a massive influx of new workers as baby boomers entered the labor force and participation among women rose.

Turnover and real hourly earnings were stronger then, even as inflation accelerated. The Vietnam War and the War on Poverty added stimulus to the economy, fueling inflation before the oil shocks of the 1970s.