"The most positive thing is the unemployment rate went down even though the participation rate went up. Net, net it doesn't tell us anything we didn't know but it does play up the divergence between the U.S. and Europe and Japan on the other hand," said Marc Chandler, chief fixed income strategist at Brown Brothers Harriman. "I think this keeps the Fed on track to raise rates in the middle of next year."
Central banks in Europe and Japan are taking aim at lagging growth with asset purchases and other easing programs. The Fed, meanwhile, is moving away, ending its quantitative easing program last month and looking to raise interest rates from zero next year.
The dollar initially fell on the report but recovered, and then slipped again. Treasury yields fell slightly after the report, and stocks were down slightly.
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"At the end of the day, this report is a 'meh.' It's good enough to keep us on the path but no news in it really," Chandler said. "It keeps the Fed on track to raise rates in the middle of next year."
One thing traders have been watching for is signs of wage growth, and the report showed average hourly workers up just 0.1 percent, less than the 0.2 percent expected. That leaves the annual increase at 2 percent, in line with what it's been for the past 12 months. The work week stands at 34.6 hours, the same as September initially before it was revised to 34.5 hours.
"That's coming. It's a matter of time. One of these months, we're going to see wages rise," said Mark Zandi, chief economist at Moody's Analytics.
Traders have been watching wages as a potential lever for the Fed. Should wage pressure pick up, their concern is it will bring the Fed off the sidelines and force it to raise rates sooner than expected.
But Zandi said while wage growth should come, it could be a long time before it becomes the inflationary issue that would force the Fed's hand. The 2 percent annual gains would have to go to more than 3.5 percent, he said.
"Wage growth could go on for a couple of years. It becomes a problem when wage growth is outstripping inflation and productivity growth," Zandi said.
Zandi said higher wages are a concern to stock investors who worry margins will be under pressure when companies start raising wages.
"Businesses are going to work harder generating earnings through expansion, revenue growth, sales growth. Through this recovery, it's been all about margin expansion," he said, noting companies realize they are at a point where they need to boost employment to generate more sales.
Job gains were broad and just one industry—information technology—showed a 4,000 decline.
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Retail gained 27,100, and typically higher paying professional and business services grew by 37,000. Manufacturing added 15,000, and government added 5,000. Transportation and warehousing added 13,000 jobs, and construction added 12,000.
"I think to get from where we are now 225,000 on average to 250,000 to 275,000, 300,000, we need the housing market," said Zandi. "We need housing construction to pick up. Once that happens, you'll see higher jobs. That's the missing ingredient to a whole other level of job growth."
He said he expects job creation to rise to the 300,000 level at this time next year.
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