Traders raised the probability of a December Federal Reserve interest rate hike to nearly 80% and the 10 year Treasury yield climbed 6 basis points to 4.894% after US October nonfarm payrolls rose 165,000, topping all 80 forecasts in Bloomberg’s survey, where estimates peaked at 131,000 with a 70,000 median. San Francisco Fed President Mary Daly said following the release that “we’re going to have to tighten policy further” to bring down stubborn inflation, even as she noted that “wage growth isn’t booming” and real wages are falling.

The Bureau of Labor Statistics also revised August payroll gains up by 53,000 to 186,000 and September up by 31,000 to 60,000, adding a combined 84,000 jobs and lifting the three month average to 137,000. Average hourly earnings increased 0.4% on the month and 3.1% from a year earlier, both above expectations of 0.3% and 2.9%, though annual pay gains remained below inflation for a seventh straight month. Labor force participation edged up to 61.9% from 61.8% as the headline unemployment rate dipped to 4.1% from 4.2%.

Beneath the headline gains, the broader U-6 underemployment rate rose to 7.9% from 7.6% as the number of people working part time for economic reasons jumped by 339,000 to 4.84 million, driven by 356,000 workers whose hours were cut due to slack business conditions. Household survey data also showed foreign born employment rose 809,000 in October while native born employment fell 64,000. White House officials still pointed to the 159,000 private sector additions and 19,000 new manufacturing jobs, which brought 2026 factory gains past 100,000, as proof of an industrial rebound.