US adds 165K jobs in October, crushing expectations of 65K

US October non-farm payrolls +165K vs +65K expected

• Prior was +29K (revised to +60K)
• Two-month net revision +84K
• Unemployment rate 4.1% vs 4.2% expected
• Prior unemployment rate 4.2%
• Unrounded unemployment 4.141% vs 4.1753% prior
• Participation rate 61.9% vs 61.8% prior
• U6 underemployment rate 7.9% vs 7.6% prior
• Average hourly earnings +0.4% m/m vs +0.3% expected
• Average hourly earnings 3.1% y/y vs +2.9% expected
• Average weekly hours 34.4 vs 34.4 expected
• Change in private payrolls +159K vs +64K expected
• Prior private payrolls +46K (revised to +78K)
• Change in manufacturing payrolls 19K vs +5K expected
• Government payrolls +6K vs -17K prior
• Household survey +463K

This is a beat from bottom to top and the wage growth will certainly make the Fed look twice. They will get another jobs report before the December 9 FOMC but this one will certainly make it more likely that they will hike rates.

If there is a hint of weakness in the report is the rise in U6. Part-time for economic reasons rose +339k to 4.84M. Almost all of it came from “slack work or business conditions” (+356k). That’s employers cutting hours.

US 2-year yields are up 4.5 bps on the day to 4.52% and USD/JPY is up 72 pips to 158.38. S&P 500 futures are still slightly higher but I think the stock market is focused on things other than macro at the moment.

Note that last month was a soft one across the board so there isn't necessarily momentum here but there are no real signs of weakness, especially considering that most of the pre-NFP jobs data was also strong for October.

Another interesting point is that there is a bifurcation in the construction center between data centers and everything else. Nonresidential specialty trade contractors are +101k y/y. Residential specialty contractors are -36k y/y, including -15.2k in October alone. Higher rates won't help unwind that.