Unemployment rate inches up to 7.9 percent; jobs increased in October

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Unemployment ticked up to 7.9 percent despite a better-than-expected job gain of 171,000 last month, the Labor Department reported Friday morning.

The last major economic report before Tuesday’s elections showed an economy on the mend and — in a surprise — a clear strengthening trend, with better-than-expected job growth in October and 84,000 more jobs than previously reported in August and September.

Still, President Obama will face voters with the highest unemployment rate of any incumbent since Franklin Roosevelt. The rate rose in October because more people began seeking work and were counted as unemployed. The government counts people without jobs as unemployed only if they’re looking for one.

Most sectors of the economy outside manufacturing posted healthy growth, and job gains were particularly strong in the traditional leading sectors in the U.S.: health care, retailing, and business services. Manufacturing has been in a slump due to lower export sales to Europe and Asia and the weakening global economy.

“It’s a very favorable report, strong in most areas,” said Andrew Wilkinson, chief economic strategist at Miller, Tabak & Co.

The report showed that the soft spell the economy experienced during the summer has rebounded, with job growth now exceeding this year’s average of 153,000 a month. Even employment in construction — the hardest hit occupation in the wake of the housing crisis — posted robust growth of 17,000 jobs during October.

“The U.S. economy has left the summer doldrums behind,” said Harm Bandholz, economist at Unicredit Markets. He noted that the better-than-expected growth in jobs in recent months likely is the source of increasing optimism seen in consumer confidence reports, which have soared to four-year highs recently.

The small increase in the unemployment rate to 7.9 percent from 7.8 percent had been widely expected as the dramatic drop reported in September from 8.1 percent had looked “too good to be true” to most economists.

Economists said the report was a small plus for Mr. Obama in his extremely tight race with GOP presidential candidate Mitt Romney.

“Obviously, these are positive numbers,” said Fabian Eliasson, vice president at Mizuho Corporate Bank. “It’s favorable for the current administration ahead of the election.”

Heidi Shierholz, analyst at the Economic Policy Institute, noted that the department’s two surveys of households and businesses were in agreement last month on the strengthening in the economy after several months of divergence. Households reported a robust increase in employment of 410,000 in October — more than twice the increase reported by businesses. That could indicate that more people became self-employed or were working as contractors.

Unemployment has dropped significantly from the 10 percent high seen in October 2009, exactly three years ago, Ms. Shierholz noted, “but it still has a long way to go to get back to full employment.”

This story is based in part on wire service dispatches.

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