The jobless rate probably rose in October as U.S. employers kepta tight rein on payrolls with the nation closing in on theso-called fiscal cliff, economists said before a report thisweek.

A net 125,000 workers were added to headcounts following anincrease of 114,000 in September, according to the median forecastof 72 economists surveyed by Bloomberg before the Nov. 2 LaborDepartment figures. The unemployment rate climbed to 7.9 percentlast month from a three-year low of 7.8 percent, the surveyshowed.

“We're just treading water, getting the labor market to growfast enough to cover population growth,” said Joshua Dennerlein, aU.S. economist at Bank of America Corp. in New York. The “drop inunemployment was probably not sustainable.”

Hiring may stay restrained as concern mounts that an economygrowing at a 2 percent pace is not strong enough to weather the taxincreases and spending cuts slated to take effect if lawmakers failto act by year's end. Coming just days before the election, thereport may also help sway voters still trying to decide betweengiving President Barack Obama another four years and changingcourse with Republican challenger Mitt Romney.

Prior to September, joblessness had exceeded 8 percent for 43months, the longest such stretch since at least 1948. At 7.8percent, unemployment last month matched the rate at the time Obamatook office in January 2009.

Ronald Reagan is the only president to have been re-electedsince World War II with unemployment above 6 percent. On ElectionDay 1984, the rate was at 7.2 percent, having dropped almost threepercentage points in the previous 18 months.

At the end of last week, Romney was leading in daily trackingpolls of likely voters. He was ahead in an Oct. 21-24 ABCNews/Washington Post survey, 50 percent to 47 percent, within thepoll's margin of error of plus or minus 3 percentage points, and bythe same advantage in an Oct. 18-24 Gallup poll, with a margin oferror of plus or minus 2 percentage points.

While the pace of job creation has slowed relative to the firsthalf of the year, consumers are still managing to spend. Theeconomy expanded at a 2 percent annual rate in the third quarter,more than forecast and boosted by household purchases, CommerceDepartment figures showed last week.

Confidence Improving

The Conference Board's consumer sentiment index may have risento 73, the highest level in four years, economists also projectahead of Oct. 30 figures.

At the same time, companies are cutting back in the face of thefiscal cliff, more than $600 billion in tax increases and spendingcuts that will take place in place in 2013 unless Congress canreach a budget compromise. Spending on equipment and software wasunchanged in the third quarter, the weakest reading in three years,a report showed on Oct. 26.

Shares of retailers and manufacturers reflect this split. TheStandard & Poor's Supercomposite Retailing Index has climbed22.2 percent so far this year, outpacing a 7.7 percent gain in theS&P's Industrial Machinery Index over the same period.

A Nov. 1 report may affirm manufacturing is slowing. Economistsforecast the Institute for Supply Management's factory index forOctober fell to 51.2 from 51.5 the prior month. A reading of 50 isthe dividing line between expansion and contraction.

Dow Chemical Co., the largest U.S. chemical maker by sales, saidlast week it will cut about 2,400 jobs and shut 20 manufacturingplants to reduce annual costs by $500 million in the face ofslackening global sales.

“We are operating in a slow-growth environment in thenear-term,” Andrew Liveris, chief executive officer of Midland,Michigan-based Dow said in a statement. “While these actions aredifficult, they demonstrate our resolve to tightly manageoperations — particularly in Europe — and mitigate the impact ofcurrent market dynamics.”

The October jobs readings will probably keep Federal Reservepolicy makers focused on trying to speed the economic expansion.They pledged to keep buying $40 billion in mortgage- backedsecurities a month until the outlook for labor-market conditionsimproves “substantially,” according a statement issued after theymet last week.

“The next payroll report is not going to change the Fed's viewthat they need to keep purchasing assets to jumpstart therecovery,” said Bank of America's Dennerlein.

Bloomberg News

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