US job growth exceeds expectations in October... and unemployment falls to 4.1%

The number of non-farm payrolls in the United States rose more than expected in October, while the unemployment rate fell to 4.1 percent, in a sign of continued labor market resilience, giving the Federal Reserve more scope to focus on inflation caused by the conflict in the Middle East.

The number of jobs jumped by 165,000 last month, after an upwardly revised increase of 60,000 jobs in September, the Labor Department's Bureau of Labor Statistics reported on Friday. Economists polled by Reuters had expected the number of jobs to rise by 65,000, after a previously announced increase of 29,000 jobs in September.

Estimates ranged between 35,000 and 125,000 jobs. Economists have estimated that the economy needs to create at least 40,000 jobs per month to keep pace with the growth of the working-age population. The break-even point, known by this name, fell from about 150,000 jobs in 2024, as a result of the shrinking size of the workforce.

The unemployment rate fell from 4.2 percent in September.

A decline in layoffs to historic levels, coupled with a recent increase in job openings, has raised the prospect of tightening labor market conditions. But economists and US Central Bank officials confirmed that the labor market does not constitute a source of inflation risks. Some economists believe that the shrinking labor supply, in light of the tightening restrictions on immigration and the retirement of numbers of workers, is the main driver of the relatively low unemployment rate.

Last week, the Federal Reserve kept its benchmark overnight interest rate within a range of 3.75 to 4 percent. Economists expect interest rates to rise in December. The October consumer inflation report, scheduled for release next Tuesday, could provide additional indications about the path of monetary policy in early 2027.

Although the labor market is resilient, job gains still lag the pace of economic growth; GDP rose at an annual rate of 3.4 percent during the third quarter, driven by strong consumer spending and a significant increase in corporate investments in artificial intelligence.

Economists said that employers may have exaggerated hiring after the “Covid-19” pandemic, and that some companies are still unsure of their employee needs in light of the integration of artificial intelligence technologies into their operations. They added that the uncertainty resulting from the US-Israeli war with Iran, which led to a rise in energy prices, also increases the reluctance of employers to increase the numbers of their employees.

Limited job opportunities have made it difficult for young people, recent university graduates, and some unemployed people to find jobs.

Dissatisfaction with the economic conditions, along with anger over the conflict in the Middle East, which has now entered its ninth month, also contributed to the loss of the Republican Party to which President Donald Trump belongs to control of Congress, after the Democrats achieved a strong performance in the midterm elections that took place this week.

Nasdaq futures rose in Friday trading, with chip company shares regaining some of their gains, following a sharp selling wave led by technology stocks, which wiped out about $3 trillion from the market value of Standard & Poor's 500 index companies, amid fears that the Democratic Party's control of the US Congress will lead to tightening regulatory restrictions on artificial intelligence.

On Thursday, the Nasdaq Composite Index recorded its largest daily decline in 19 months, officially entering the correction zone, and heading towards recording losses for the fourth week in a row, according to Reuters.

Jane Gibbons, equity strategist at Jefferies, said: “We view the wave of selling that the markets witnessed on Thursday as a reaction to developments, not a fundamental shift in fundamentals, as it came as a result of the intersection of concerns related to spending on artificial intelligence, economic policies, and inflation.”

The sharp losses came after Democrats won the midterm elections earlier in the week, including in some key states that host data centers, which raised concerns about a slowdown in the expansion of the construction of data centers dedicated to artificial intelligence. Optimism about the rapid growth of this sector has pushed stock markets to record levels this year.

The Chicago Stock Exchange's volatility index, the VIX, known as the fear index on Wall Street, recorded its largest daily jump in about 19 months during Thursday's session, before falling slightly on Friday to 26.70 points.

As of 6:24 a.m. EST, Dow Jones Industrial Average futures fell 471 points, or 0.91 percent, while Standard & Poor's 500 futures rose 0.29 percent, and Nasdaq 100 futures rose 1.41 percent.

The performance of shares of giant technology companies and growth stocks varied, while “Nvidia” stock rose by 4.5 percent in pre-market trading, after in the previous session it suffered its worst daily loss since January 2025, when the emergence of the low-cost Chinese artificial intelligence model “Deep Sec” sparked turmoil on Wall Street.

Shares of other chip companies, including AMD, Intel, Broadcom, and Micron Technology, also rose by rates ranging between 4.6 percent and 8.2 percent.

The recovery extended to data center operating companies, such as “Irene” and “Applied Digital”, and specialized cloud infrastructure companies, such as “CoreWave” and “Nebius Group”, in addition to utility companies and equipment suppliers related to the artificial intelligence sector, including “GE Vernova” and “Constellation Energy”, after these stocks suffered sharp losses in the previous session.

Tesla and SpaceX shares, led by Elon Musk, rose by 2 percent and 4 percent, respectively, after falling strongly during the previous two sessions.

The sharp rise in crude oil prices on Thursday put additional pressure on stocks, in light of fears of stoking inflation due to energy costs, and the resulting tendency for global central banks to raise interest rates. Brent crude futures were largely stable during Friday trading.

Despite the rise in oil prices in the previous session, they were heading towards recording sharp weekly declines, which puts the energy sector index within the Standard & Poor's 500 on a path of loss exceeding 11 percent during the week.

On the other hand, the broader Standard & Poor's 500 index was heading towards recording its worst weekly performance since March 2025, when concerns related to the customs policies of the administration of US President Donald Trump sparked widespread unrest in global markets.

Investors' attention is turning to the US jobs report for October, scheduled to be released at 8:30 a.m. EST, searching for indications about the next path of interest rates. According to the CME Group's Fed Watch tool, markets are pricing in a probability of more than 65 percent to raise interest rates in December.

In terms of individual stock movements, the shares of the software company “Atlassian” fell by 14.1 percent after announcing its results for the first quarter, while the shares of the accommodation rental platform “AirBNB” jumped by 12.2 percent, after the company raised its expectations for revenue growth during the year 2026.

The pound sterling fell against the dollar on Friday, in light of a broad wave of selling in stock markets that pressured the currencies most closely linked to global economic growth, while it maintained its relative stability against the euro, near its highest levels in 19 months.

Lee Hardman, chief currency analyst at the MUFG Group, said, “The impact of the Bank of England’s latest monetary policy update, issued yesterday, has diminished in the face of pressures resulting from the expanding wave of selling investments related to artificial intelligence,” according to Reuters.

The meeting held by the Bank of England on Thursday was the most prominent economic event in Britain this week. It resulted in raising interest rates, along with strong indications of the possibility of the need for further increases, unless there is a sudden decline in the intensity of tensions in the region, leading to a decline in oil prices.

Technology stocks witnessed a sharp decline on the Wall Street Stock Exchange during Thursday's trading, before the wave of decline extended to the Asian markets on Friday, and then expanded with the start of European trading, which strengthened the demand for the US dollar.

In the latest transactions, the British pound recorded $1.3399, down by 0.4 percent, despite remaining almost stable on a weekly basis, supported by the gains it achieved during the previous sessions.

Against the single European currency, the pound settled at 83.41 pence per euro, with no significant change on a daily or weekly basis, remaining close to its highest level since March 2025, which is the level it reached on Thursday following the Bank of England meeting.

Hardman explained that the pound sterling has benefited during the recent period from growing optimism regarding improved British economic growth prospects, rising returns on sterling-denominated assets, as well as escalating financial concerns in the eurozone compared to the United Kingdom.

He added that the recent update of the Bank of England's monetary policy would enhance the upward trend of the pound sterling as the end of the year approaches, but he warned that the widening wave of decline in the shares of artificial intelligence companies may constitute one of the most prominent risks threatening the British currency during the coming period.