171,000 jobs added in October; jobless rate 7.9%

• October nonfarm job gains total 171,000
• Unemployment rate at 7.9%, up from 7.8% in September
• Earlier reports pointed to an improved jobs picture

Employers added 171,000 jobs in October, the Labor Department said Friday in the last employment report before the presidential election. The growth was better than what many economists had predicted.

The unemployment rate ticked up to 7.9%, from 7.8%, as formerly discouraged workers resumed looking for work. The labor force -- those working and looking for work -- increased by 578,000.

In afternoon trading, major stock indexes were modestly lower although stocks had initially traded higher after the report was released. It seemed as though investors were undecided over whether the jobs report was strong enough to boost confidence in the market.

Businesses added 184,000 jobs, while federal, state and local governments cut 13,000. That was the highest amount of government job losses since June. Reductions in government jobs have hampered the jobs recovery the past two years.

Professional and business services, health care and retail drove the private-sector job additions.

Later Friday, the Commerce Department said companies boosted orders for manufactured goods by the largest amount in 18 months in September, but remained cautious in ordering goods that signal plans to expand and modernize.

Factory orders rose 4.8% from August, a month when orders fell 5.1%. September's gain was the biggest since March 2011 and was driven by demand for commercial aircraft, a volatile category.

Demand for core capital goods, viewed as a proxy for business investment plans, edged up a slight 0.2% in September following a 0.3% rise in August. The two modest gains followed two months of huge declines.

Economists surveyed by Bloomberg had estimated that non-farm employment would rise by 125,000 last month, with businesses adding 124,000 jobs and governments adding 1,000.

The Labor Department revised up job gains for August and September by a total 84,000. Gains for August were revised to 192,000 from 142,000, and September's were revised to 148,000 from 114,000.

Monthly job growth has averaged 170,000 the past three months, up from 104,000 the previous three months. So far this year, monthly additions have averaged 157,000, about the same as last year's 153,000.

The report should dispel concerns that September's sharp drop in the unemployment rate, from 8.1% to 7.8%, was a statistical fluke, says Jim O'Sullivan, chief U.S. economist of High Frequency Economics. "The trend in job growth is clearly strong enough to bring down unemployment," he says.

He added, however, that economic growth must pick up from its current 2% annual pace to produce substantially stronger job gains that would quickly bring down unemployment.

Although job growth remains modest, the improvement is "likely to sway (some) marginal voters (toward President Obama) ahead of the election," says Jason Schenker, president of Prestige Economics.

Other signs of the job market's heath were mixed. The average workweek in October was unchanged for the fourth straight month at 34.4 hours. Employers generally boost the hours of existing employees before bringing on new ones. And average hourly earnings dipped 1 cent to $23.58.

Another sign of future staff additions was a bit more encouraging. Employers added 14,000 temporary workers after cutting 11,000 in September.

Meanwhile, a broader measure of the labor market's status -- the underemployment rate -- dipped to 14.6% from 14.7%. That group includes the unemployed, as well as discouraged Americans who've stopped looking for work and part-time workers who prefer full-time jobs.

And the number of people out of work at least six months rose by 158,000 to 5 million. Those long-term unemployed represent 41% of all the jobless.

Professional and business services led job gains with 51,000, followed by 36,000 in retail and 32,000 in health care. Construction added 17,000 jobs and manufacturing, 13,000.

Other barometers of the job market have been more encouraging recently. The government reported Thursday that first-time jobless claims last week fell 9,000 to 363,000. And a private survey estimated businesses added 158,000 jobs in October.

On other fronts, the economy has shown improvement with retail sales, consumer confidence and the housing market strengthening. Falling gasoline prices are likely to provide a further boost to consumer spending

But businesses have pulled back on investment and hiring amid looming tax increases and spending cuts that could hobble the U.S. economy if Congress doesn't act. And the European financial crisis continues to curtail U.S. exports.

"The fiscal issue is weighing on (business) confidence," says Mark Zandi, chief economist of Moody's Analytics. "That's being reflected in (declining) investment and the lack of a pickup in hiring."

The Commerce Department recently said that economy grew at a 2% annual pace in the third quarter, up from 1.3% in the second quarter, a modest expansion that's unlikely to result in robust job growth.