America’s shrinking workforce is rewriting what a strong jobs report looks like, and October’s 165,000 new jobs, nearly three times forecasts, show a labour market hot enough to push the Federal Reserve into a December rate hike, affirms the CEO of deVere Group, one of the world’s largest independent financial advisory organisations.
The comments from Nigel Green come as the Bureau of Labor Statistics reports that payrolls rose by 165,000 last month, well ahead of forecasts of 59,000, while unemployment fell to 4.1%.
He says: “A smaller workforce means as few as 40,000 hires a month can hold unemployment steady, so October’s figure is enormous by today’s standards.
“A jobs market this hot, with unemployment at 4.1% and inflation at 3.7%, leaves the Fed with very little room to sit still.
“I believe a December hike now looks highly likely.”
October’s jump follows almost two years in which payrolls averaged roughly 35,000 a month, with seven months of outright losses.
Yet unemployment barely moved, as the labour force shrank by close to a million in a year and participation slid to 61.8% by September.
“More Americans are retiring, birth rates have been low for decades, and immigration has fallen sharply,” notes Nigel Green.
“With fewer workers to go round, employers can’t afford to let people go. Layoffs are near historic lows, quits are at an 18-month high and vacancies are rising. Add a surge in hiring on top and you’ve got a labour market straining at capacity.”
October’s data removes much of the Fed’s case for patience. Chair Kevin Warsh has already described the labour market as consistent with maximum employment, leaving inflation as the committee’s central concern.
The Fed hiked in September for the first time in three years, to 3.75% to 4%, then held in October with two policymakers pushing for more.
Before today’s figures, markets put the chance of another quarter point rise when officials meet on 8 and 9 December at roughly 70%.
“October’s numbers make December very hard to skip,” the deVere CEO comments.
“Consumer prices are rising 3.7% a year, and wages jumped 0.4% in October alone, which is precisely what the Fed doesn’t want to see. Rates are likely heading higher, and I wouldn’t rule out further increases in 2027.”
Democrats seized both the House and the Senate on Tuesday after a campaign fought on the cost of living, and Wall Street posted one of its strongest post-election sessions in decades the next day.
“Voters have delivered a brutal verdict on prices, and the Fed now owns the problem,” says Nigel Green.
“Gridlock in Congress likely means less fiscal firepower over the next two years, which should cool inflation a little. It also leaves the Fed as the main weapon against the cost of living, and a hot jobs market gives it the licence to use it.”
Long-term unemployment, meanwhile, rose by 495,000 between January 2025 and September, and the average jobless spell stretched to 24.8 weeks.
The report also lands a day after tech stocks suffered their worst session since March 2020, as investors reassessed the pace of AI spending.
“When workers are scarce, businesses have to get more out of every hour, so they’re pouring money into automation and AI,” Nigel Green says. “The long term case for companies helping firms do more with fewer people keeps getting stronger, whatever the market did this week.
“The 200,000 a month benchmark belongs to another era. In this one, fewer workers keep the jobs market tight and keep the Fed leaning towards higher rates.
“December is likely the first proof of it.”
