Investing.com - The U.S. economy added far more jobs than anticipated in October, while the unemployment rate dipped, in a sign of a robust labor market that could bolster arguments for a Federal Reserve interest rate hike next month. Dig deeper into key economic indicators with InvestingPro - now 55% off Nonfarm payrolls jumped to 165,000, rising from an upwardly revised total of 60,000 in September and topping economists’ expectations of 65,000. Job gains increased in professional and business services, health care, transportation and warehousing, the Labor Department’s Bureau of Labor Statistics said in a statement on Friday. Employment figures for August and September were revised up by a combined 84,000 roles.

Despite pressures from energy-fueled inflation sparked by the Iran war, as well as worries that developments in artificial intelligence will lead to widespread job losses, the American labor market has remained broadly resilient. The labor force participation rate ticked up slightly to 61.9%, carrying on a rebound from a July low. Layoffs have been historically low and job openings are climbing, data earlier this week showed. First-time claims for jobless benefits, one of the most up-to-date trackers of the health of labor market, also sank to a 57-year trough last week.

Questions have swirled around whether the labor market is now tightening to a degree that could risk contributing to elevated inflation. However, some economists and Fed officials have maintained that this is likely not the case, saying instead that an immigration crackdown by the Trump administration and retirements are tamping down the unemployment rate by shrinking the available supply of workers.

In October, the jobless rate edged down to 4.1%, compared to forecasts that it would September’s level of 4.2%.

Wage gains may even be on a downward trajectory. On a year over year basis, average hourly earnings growth eased to 3.1% from 3.2%. Although estimates had called for a shallower gain of 2.9%, the number has cooled from 3.8% in February.

While this could be an indicator of a disinflationary impulse coming from the job market, decelerating wage gains may place a further strain on American households grappling with an ongoing cost-of-living crisis. Affordability was a central issue driving voters to largely reject U.S. President Donald Trump’s policy agenda -- which has included a prolonged war with Iran and aggressive tariffs on global trading partners -- in this week’s midterm elections.

Against this backdrop, Fed policymakers will need to decide how best to calibrate rates to quell inflation, ideally without denting economic activity or labor demand. Indications of strength in the job market could give officials the headroom to raise borrowing costs at their final meeting of the year in December. The central bank previously increased rates for the first time in three years in September.

"This report suggests that the labor market remains near full employment in the U.S., which should free up the Fed to continue to focus on the inflation fight," analysts at CIBC Capital Markets said in a note.

Following the jobs report, markets continued to price in a roughly three-in-four probability of 25-basis-point rate hike by the Fed next month, according to CME FedWatch. Those chances had been dented on Thursday, when a deep stock-market rout rattled investors’ confidence in an artificial intelligence boom which has largely propped up U.S. growth.

But that selloff paused on Friday, as dip-buying buoyed chip stocks in early U.S. trading. The tech-heavy Nasdaq Composite and benchmark S&P 500 advanced after the employment data, while the rate-sensitive 2-year Treasury yield and its 10-year benchmark counterpart rose. Yields tend to move inversely to bond prices.

"While the weakness in equities is contributing to tightness in financial conditions, we doubt those moves have been enough so far to rule out a December rate hike," said Ariane Curtis, Senior North America Economist at Capital Economics, in a note.