US Hiring Rebounds in October as an Energy Price Surge Leaves Real Pay Falling

The US labour market had a stronger October than its pace over the past year would have suggested. Payroll employment rose by 165,000, according to the Bureau of Labor Statistics (BLS) report published on 6 November 2026, and the BLS revised up its estimates for August and September. The unemployment rate was 4.1%, little changed from September and at the bottom of the 4.1–4.3% range it has stayed within since March.

Jobs are only half of what matters to households. The other half is what pay buys, and on that measure the past year has gone backwards. Average hourly earnings adjusted for consumer prices were 0.7% lower in September 2026 than a year earlier, the BLS reports, because prices rose faster than pay.

This article looks at both halves: how solid October's hiring rebound is, and why workers are earning more but able to buy less.

What the October report shows

The rebound was concentrated in services. Professional and business services added 70,000 jobs, led by professional, scientific and technical services (+33,000), and health care added 42,000. Transportation and warehousing added 25,000 and manufacturing 19,000. Construction, retail, leisure and hospitality, financial activities, information and government showed little change.

The household survey, which is used to measure unemployment, pointed the same way. Participation rose to 61.9% from 61.6% in August, and the employment-population ratio rose to 59.3% from 59.1%, so the larger labour force was matched by more people in work.

One reason the 12-month average of 48,000 understates the recent pace is easy to miss. It includes October 2025, when payrolls fell by 140,000 and government employment by 153,000. That month's household survey was not collected at all because of the federal government shutdown. Leaving out October 2025, the average for the following 11 months is about 65,000. The average for the three months to October 2026 is 137,000.

Why pay is falling behind

Wage growth has slowed. The Employment Cost Index (ECI), which measures pay for a fixed mix of occupations and industries and so is not distorted by shifts in employment between them, shows private-sector wages and salaries up 3.1% in the year to September 2026, down from 3.6% a year earlier. Average hourly earnings rose 3.1% in the year to October 2026, but October price data have not yet been published, so that figure cannot yet be set against inflation.

Prices moved the other way. Consumer prices (CPI-U) rose 3.7% in the year to September 2026, up from 3.0% a year earlier. Energy prices were 20.4% higher than in September 2025, and petrol (the BLS gasoline index) 34.2% higher. In September alone the petrol index rose 9.1% and accounted for over half of the month's rise in consumer prices, the BLS reports.

Excluding food and energy, prices rose 2.6%, slower than the 3.0% of a year earlier. Food inflation also eased, to 2.5% from 3.1%, and shelter costs rose 3.2%.

Put the two together and real pay has turned negative. The BLS measures inflation-adjusted ECI wages and salaries for private-sector workers down 0.6% over the year to September 2026, and real average hourly earnings for all employees down 0.7%. Real weekly earnings fell by only 0.1%, because the average workweek was 0.6% longer than a year earlier.

EconoLens Analysis: an energy squeeze on pay, not a collapse in wages

All comparisons here use September 2026, the latest month for which the BLS has published both wage and price data. On ECI wages deflated by headline CPI, real pay swung by about 1.2 percentage points over the year, from a gain of about 0.6% in the year to September 2025 to a loss of about 0.6%. Nominal wage growth slowed by 0.5 points, from 3.6% to 3.1%. Headline inflation rose by 0.7 points, from 3.0% to 3.7%, so higher inflation accounts for about 60% of the swing.

That rise in inflation came entirely from energy. Core inflation fell from 3.0% to 2.6% and food inflation from 3.1% to 2.5%, while energy inflation rose from 2.8% to 20.4%. On an approximate EconoLens calculation using BLS expenditure weights, energy added about 1.1 points more to headline inflation than a year earlier, more than the 0.7-point rise in the total. In September 2026 headline inflation was 1.1 points above core; a year earlier the two were equal.

Measured against core inflation, the margin of wage growth over prices has barely changed: about 0.6 points in the year to September 2025 and about 0.5 points in the year to September 2026, because wage growth and core inflation slowed by similar amounts. This is a gauge of underlying pay pressure, not of living standards. Energy is a real cost that households pay, and headline inflation is the measure that shows what their pay buys.

Two simple counterfactuals point the same way. Had wage growth held at 3.6%, real pay would still have fallen by about 0.1% with inflation at 3.7%. Had prices risen at the core rate instead, real pay would have grown by about 0.5% even with wage growth at 3.1%. The evidence supports a narrow claim: the fall in real pay is mainly the result of the energy price surge, with slower wage growth the smaller contributor, and it is not a sign that pay has collapsed.

The World Bank's October 2026 Commodity Markets Outlook forecasts its energy price index falling 11.5% in 2027, with Brent crude averaging $79 a barrel against a forecast $91 in 2026. That is a projection, and it assumes no major intensification of hostilities in the Middle East. The index tracks world commodity prices, not US retail energy prices, so it indicates the direction rather than the size of any fall in consumer energy inflation.

The strongest evidence against an early recovery in real pay is that wage growth is still slowing and some measures of slack are rising. The number of people working part time for economic reasons, because they could not find full-time work or had their hours cut, rose by 339,000 in October to 4.84 million, and by 450,000 since August. The long-term unemployed were 27.6% of all unemployed. If nominal wage growth keeps falling, cheaper energy would restore only part of the lost purchasing power.

Where the assessments disagree

The case that the labour market is strengthening rests on the October report and its revisions. Payroll growth over the three months to October averaged 137,000, participation and the employment rate both rose, and the BLS's September job openings survey shows openings at 7.5 million (a rate of 4.5%, against 4.3% a year earlier) and quits up 375,000 over the year, which suggests workers are more willing to leave jobs for others.

The case that it is cooling rests on hours and pay. Involuntary part-time work has climbed for two months, and wage growth on the ECI has slowed by half a point in a year. Layoffs remain low, at a rate of 1.0% in September, so the cooling, if it is happening, is showing up in hours and pay rather than in job losses.

Both readings can be true at once. Employers are adding jobs, but they are not competing as hard on pay as they were a year ago.

Global implications

The energy shock is not confined to the United States. The World Bank forecasts its world energy price index rising 32% in 2026, so fuel-importing economies can be expected to see headline inflation run above core in a similar way, although this article has not examined their wage data. Where that happens, a fall in real pay says more about fuel prices than about the labour market, and central banks face the question of how far to look through it. EconoLens has covered Australia's November rate rise and the World Bank's 2027 forecasts for energy and food prices.

What happens next

• 10 November 2026: BLS consumer prices and real earnings for October 2026, the first like-for-like real-pay figure for October.
• 1 December 2026: BLS job openings and labour turnover survey for October 2026.
• 4 December 2026: BLS employment report for November 2026.
• 29 January 2027: BLS Employment Cost Index for the fourth quarter of 2026.

The signs to watch are whether energy prices keep rising, whether ECI wage growth slows further, and whether involuntary part-time work keeps climbing. A wage slowdown that continues while energy stays high would deepen the squeeze.

Conclusion

October's employment report was a good one, and the revisions to August and September make the second half of 2026 look stronger than it first appeared. But workers are not yet seeing it in their pay. Over the past year prices outpaced wages, mainly because of the energy price surge, with slower wage growth the smaller part. Whether real pay recovers in 2027 depends on energy prices falling as the World Bank forecasts and on wage growth holding near 3%.

The data and the working

Real wage growth = (1 + nominal wage growth) ÷ (1 + inflation) − 1. ECI private wages and salaries against CPI-U: September 2025, 1.036 ÷ 1.030 − 1 = +0.58%; September 2026, 1.031 ÷ 1.037 − 1 = −0.58% (the BLS's own constant-dollar figures: +0.6% and −0.6%). Swing: −0.58 − 0.58 = −1.16 points, of which nominal wage growth 3.1 − 3.6 = −0.5 and headline inflation 3.7 − 3.0 = +0.7; 0.7 ÷ 1.16 ≈ 60%.

Against core CPI: September 2025, 1.036 ÷ 1.030 − 1 = +0.58%; September 2026, 1.031 ÷ 1.026 − 1 = +0.49%. Headline minus core: 3.7 − 2.6 = 1.1 points in September 2026 and 3.0 − 3.0 = 0 in September 2025. Counterfactuals: 1.036 ÷ 1.037 − 1 = −0.10%; 1.031 ÷ 1.026 − 1 = +0.49%.

Energy contribution (approximate): BLS relative importance of energy, August 2025, 6.400% of the CPI basket. 0.064 × 20.4 = 1.31 points in September 2026 against 0.064 × 2.8 = 0.18 points in September 2025, a rise of about 1.1 points. Core: 0.800 × 2.6 = 2.08 against 0.800 × 3.0 = 2.40 (−0.32). Food: 0.136 × 2.5 = 0.34 against 0.136 × 3.1 = 0.42 (−0.08). The same weights are used for both years, so the result is an approximation; the components sum to 3.73 and 3.00, matching the published totals.

Both the ECI and CPI 12-month changes are not seasonally adjusted, and both refer to September, so they are comparable.

Payrolls: three-month average (186 + 60 + 165) ÷ 3 = 137,000. Twelve-month average excluding October 2025: (48 × 12 + 140) ÷ 11 ≈ 65,000; because the BLS rounds the 48,000 average, the result is approximate (range 64,500–65,600). Revisions: 53,000 + 31,000 = 84,000. October gain against the 12-month average: 165 ÷ 48 ≈ 3.4 times.

Average hourly earnings, October 2026: $38.00 ÷ $36.85 − 1 = 3.1%. Involuntary part-time work: 4.840 − 4.501 = +0.339 million from September; 4.840 − 4.390 = +0.450 million from August. Quits: 3.365 − 2.990 = +0.375 million over the year to September 2026.

Related reading on EconoLens: the July 2026 US jobs report, the Fed's September 2026 rate rise, the World Bank's 2027 forecasts for energy and food prices, Australia's November rate rise, and the live US unemployment and US CPI indicators.

FAQ

How many jobs did the US add in October 2026?

Nonfarm payrolls rose by 165,000 in October 2026, according to the BLS, against an average monthly gain of 48,000 over the prior 12 months. The unemployment rate was 4.1%, little changed from 4.2% in September. The October figure is preliminary and will be revised.

Are US wages keeping up with inflation?

Not at present. In the year to September 2026, private-sector wages and salaries rose 3.1% on the Employment Cost Index, while consumer prices rose 3.7%. The BLS measures real wages and salaries down 0.6% over the year, and real average hourly earnings down 0.7%.

Why have real wages fallen?

Mainly because of energy prices, which rose 20.4% in the year to September 2026 and pushed headline inflation 1.1 points above core inflation. Inflation excluding food and energy was 2.6%, below wage growth. Wage growth has also slowed, from 3.6% a year earlier, which accounts for the smaller part of the fall.

What is the Employment Cost Index?

It is a quarterly BLS measure of the cost of labour that holds the mix of occupations and industries fixed, so its changes reflect changes in pay rates rather than shifts in employment between occupations and industries.

What would make real pay rise again?

A fall in energy prices, with wage growth holding near its current pace. The World Bank forecasts its energy price index falling 11.5% in 2027, though that is a projection and the index tracks world commodity prices rather than US retail prices. If wage growth keeps slowing, cheaper energy would restore only part of the lost purchasing power.

Sources

• US Bureau of Labor Statistics: The Employment Situation — October 2026, 2026-11-06
• US Bureau of Labor Statistics: Consumer Price Index — September 2026, 2026-10-14
• US Bureau of Labor Statistics: Real Earnings — September 2026, 2026-10-14
• US Bureau of Labor Statistics: Employment Cost Index — September 2026, 2026-10-30
• US Bureau of Labor Statistics: Job Openings and Labor Turnover — September 2026, 2026-11-03
• US Bureau of Labor Statistics: Consumer Price Index — September 2025, 2025-10-24
• World Bank: Commodity Markets Outlook, October 2026, 2026-10-28

Disclaimer: This article is for informational purposes only and does not constitute investment advice. EconoLens is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making investment decisions.