Employers Add 171,000 Jobs in October

The final jobs report before the election shows continued slow and steady labor market improvements.

A sign attracts job-seekers during a job fair at the Marriott Hotel in Colonie, N.Y., on Oct. 25, 2012.

A sign attracts job-seekers during a job fair at the Marriott Hotel in Colonie, N.Y., on Oct. 25, 2012.

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The unemployment rate ticked upward to 7.9 percent in October from September's 7.8 percent, with non-farm employers adding 171,000 jobs. The figures come from the Labor Department, in the government's final jobs report before Tuesday's election.

The figure beats consensus expectations of around 125,000 new jobs, and the report also reflects positive revisions to past months' numbers. August's jobs number was revised up from 142,000 to 192,000, and September's figure was also bumped upward, from 114,000 to 148,000.

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The report also suggests that Americans are increasingly looking for work. The labor force participation rate—the share of working-age Americans either with a job or looking for one—ticked up 0.2 percentage points last month, to 63.8 percent. That could be a sign that jobless Americans see a stronger job market and are optimistic enough to go back on the job hunt.

Though the report contains plenty of promising signs, 171,000 new jobs is still modest growth, continuing a long pattern of sluggish labor market recovery.

"The refrain from this jobs recovery has been, 'It's better but it's not good enough.' We're still singing that song," says Patrick O'Keefe, director of economic research at accounting firm CohnReznick and a former deputy assistant secretary in the Labor Department.

The report reflects job growth across most industries, with retail trade leading the way at 36,400 jobs. Health care and social assistance, which has been a bright spot throughout the recovery, added 32,500 jobs. Industries shedding jobs included mining and logging, at 9,000, motor vehicle manufacturing, at 2,100, and government, with 13,000 jobs lost.

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One encouraging sign came in construction, which added 17,000 jobs. Since the housing collapse, that industry has slowly worked to regain some of the more than 2 million jobs it lost since 2007. While that may be yet another sign of a much-needed housing recovery, it may also signal increasing demand for renovations and commercial buildings, says one analyst.

"From an employment perspective, we don't much care whether someone's driving a hammer on a new single-family detached home, putting a girder in place for a high-rise residential, or refurbishing an existing home," O'Keefe says. "They're good jobs, they pay well, and it bolsters the economy."

As has been the case for several months, the so-called "fiscal cliff" of expiring tax cuts and scheduled spending cuts continues to weigh on the labor market. That is working to counteract recent improvements in areas such as consumer spending and housing, one economist says.

"If I was a business person just dropped down from the moon and did not see any news or anything, I'd say this is an economy that really looks like it's beginning to turn," says Joel Naroff, president of economic consulting firm Naroff Economic Advisers. "You'd expect me to start investing more and hiring more to start taking advantage of a turning economy."

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However, he says, the uncertainty created by the cliff is causing businesses to hold off on hiring and investing, putting a damper on the recovery. By Congressional Budget Office estimates, going off the fiscal cliff could potentially send the U.S. economy into recession next year.

Though the fiscal cliff is still two months away, it is important to resolve it sooner than later, as the effects are already being felt.

"In some sense, we've already gone off the cliff, because we're already deferring decisions," O'Keefe says.

He also adds that even without the fiscal cliff, plenty of headwinds remain for economic recovery, including the European debt crisis and slowdowns in emerging economies such as China.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter @titonka or via E-mail at dkurtzleben@usnews.com.