The long waited non-farm payroll showed a stronger-than-expected increase in new jobs in October. US economy added 261,000 jobs while the monthly growth has averaged 407,000 thus far in 2022, compared with 562,000 per month in 2021. Moreover, the unemployment rate rose to 3.7 percent from 3.5% in September.

Notable job gains occurred in health care (+53,000), professional and technical services (+43,000), and manufacturing (+32,000). Average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.4 percent, to $32.58.

The 261,000 figure was well above the 193,000 consensus forecast and there were upward revisions for the past two months totaling 29,000.

But more significantly for the markets was the 0.4% month-on-month print for average hourly earnings, which supports that excess demand argument.

In aggregate, it suggests the labour market remains fairly robust and it keeps alive the possibility of a fifth 75bp hike. However, there is another jobs report and two more CPI reports before the December 14th FOMC decision. Within those three reports the markets still feel there will be enought to justify a step down to 50bp.