The US labour market showed unexpected strength in October as employers added 165,000 jobs, significantly exceeding economists’ forecasts of approximately 65,000, according to employment data released by the US Labor Department on Friday.

The unemployment rate declined to 4.1% from 4.2% in September, signalling an improvement in employment conditions. Job growth in August and September was also revised upwards by a combined 84,000 positions, indicating that the labour market performed better than previously estimated.

Professional and business services led employment gains, adding 70,000 jobs during October. Healthcare employment increased by 42,000, while transportation and warehousing added 25,000 positions. Manufacturing employment rose by 19,000, marking another month of expansion in the sector.

However, the improvement in headline employment figures does not mean that all workers are benefiting equally. Construction and leisure and hospitality experienced job losses, while long-term unemployment and underemployment remain concerns.

Average hourly earnings increased 3.1% compared with a year earlier. However, wage growth remained below the reported inflation rate of 3.7%, putting pressure on household purchasing power.

The stronger-than-expected employment report could also influence the Federal Reserve’s monetary policy decisions. Strong hiring and persistent inflation may give policymakers less reason to reduce interest rates and could increase expectations of further tightening.

Despite the positive employment figures, economists say challenges remain for job seekers, particularly recent graduates and workers competing for entry-level positions as businesses increasingly adopt artificial intelligence.

The latest figures suggest that the US economy continues to demonstrate resilience, although inflation, affordability and uneven employment opportunities remain significant concerns.