U.S. job growth surged in October and the unemployment rate edged lower, signs of labor-market strength in an expanding economy.

Nonfarm payrolls increased 165,000 last month, topping all forecasts, after an upward revision to the prior two months, according to Bureau of Labor Statistics data out Friday. The unemployment rate fell to 4.1%.

Employers across a broad range of sectors added jobs, including in professional and business services, healthcare and manufacturing. Overall private-sector payroll growth was the strongest since March.

Resilient consumer spending and strong business investment have supported demand and boosted corporate profits this year, encouraging companies to add more workers. Job growth has been uneven from month to month, but overall hiring has been strong enough to keep the unemployment rate at or below 4.5% for five years, the longest such stretch on record.

Federal Reserve officials will see one more jobs report and a full slate of inflation data before their next meeting in December. Investors expect them to raise interest rates at that gathering to counter inflation, following an increase in September and a subsequent decision to leave rates unchanged in October.

“The report was broadly strong,” said Oscar Munoz, head of U.S. economics at TD Securities. “This should allow the Fed to continue focusing on inflation and what’s happening in financial markets.”

If sustained, solid job growth “would bode well not only for the labor market, but also for consumption and for spending,” he added.

Fed Chairman Kevin Warsh last week described employment conditions as “quite positive” and said the central bank was focused on prices. The yield on 2-year Treasury notes rose and the S&P 500 was higher following the release.

Healthcare and social assistance employers added about 55,000 workers to payrolls in October, the most in six months. That sector has been the biggest driver of job growth in recent years.

Spending on data centers and demand for AI-related infrastructure has supported construction and manufacturing employment this year. Friday’s report showed that nonresidential construction firms continued to add jobs, even as broader construction payrolls were weighed down by losses in residential building.

Factory headcount also saw solid gains, with computer and electronic product manufacturing firms adding the most jobs in four years.

“The economy has been growing above trend, and even as businesses place greater emphasis on productivity, technology and disciplined headcount management, they continue to hire where demand warrants it,” EY-Parthenon’s Gregory Daco and Lydia Boussour said in a note.

Employment in the information and financial activities sectors, which have seen some of the fastest rates of job loss and AI adoption this year, showed tentative signs of stabilization in October.

Goldman Sachs Group Inc. economists, in a note published this week, said “AI’s labor market impact has become increasingly visible in recent months,” with “higher adoption associated with weaker job growth and higher unemployment” across nonmanufacturing industries.

What Bloomberg Economics Says...

“October hiring was strong and broad-based, and the upward revisions show the summer slowdown was milder than first reported. With unemployment edging down and wage growth firming, the labor market is not loosening the way we had anticipated. We still expect the Fed to hold in December on tighter financial conditions, but the risk of another hike has risen.”

— Anna Wong, Andrew Sacher and Eliza Winger

The report also suggested the labor market is generating little wage pressure. Average hourly earnings advanced 3.1% from a year earlier, matching the slowest pace since 2021. On a monthly basis, however, they rose 0.4%, topping forecasts.

The wage figures highlight a key source of voter frustration in this week’s midterm elections. While the unemployment rate has been low, pay hasn’t kept up with inflation throughout most of 2026.

The participation rate — the share of the population that is working or actively looking for work — edged up to 61.9% in October, the highest since March. A broad measure of unemployment also rose as the ranks of those working part-time for economic reasons jumped to a six-month high.

Measures of long-term unemployment worsened, with the median duration of a jobless spell reaching 11.9 weeks, the longest since 2021. Labor-market turnover has been historically low for much of the last few years, which has made it difficult to find new jobs and led many to feel either locked out or stuck in place.

The payroll numbers have seen wild swings this year from month to month, with sometimes large deviations from economists’ estimates. The median forecast in Bloomberg’s survey for the October report was off by 95,000, and four other reports this year have seen misses at least as large.

Separate data out Friday showed U.S. consumer sentiment rose in early November to a three-month high.

—With assistance from Julia Fanzeres, Aidan Williams and Michael Sasso.

(Updates with comment from economists.)

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