Rising consumer demand is lifting hiring to the fastest pace since last winter, data showed Friday, despite the looming fiscal cliff of tax hikes and budget cuts threatening to kick in Jan. 1.
Payrolls swelled by 171,000 in October vs. 148,000 in September, and upward revisions totaled 84,000, the Labor Department said. Consumer-focused sectors like retail and restaurants have been among the top gainers in recent months.
A separate household survey found the jobless rate rose to 7.9% from 7.8% as 578,000 more people entered the workforce.
U.S. stock indexes initially rose, but steadily sold off, even though the payroll gain beat forecasts of 125,000.
The latest jobs report isn't seen having much political impact, as it doesn't suggest a major shift in the economy and comes days before a presidential election that has pushed early voting.
"We're getting some growth, but it's not recovery growth," said Keith Hall, a senior research fellow at George Mason University's Mercatus Center and a former Bureau of Labor Statistics commissioner.
The average payroll gain over the past four months is 173,000, about double the preceding four months, but barely more than what's needed to keep up with population increases.
Monthly gains need to exceed 250,000 to qualify as recovery growth, and the economy would have to expand by more than 3% vs. Q3's 2% pace, he says.
Americans would have to wait for several years before the economy creates the 10 million jobs needed to cut the unemployment rate to 5%, he estimates.
But consumers are more confident and spending like it. That helped retailers add 36,400 jobs last month, the most since April 2011. The health care sector added 30,500 while restaurants and bars added 22,900.
Professional and business services hired 51,000 after hiring 8,000 in September. Construction firms had 17,000 more, the most since January, in a sign the recovering housing market is spilling over into employment.
But the concentration has been in low-paying jobs. Average hourly pay fell by a penny last month to $23.58. Year over year, wages rose just 1.6%, the smallest gain in several years.
An earlier report found workers in retail and food service were the only ones to earn lower wages in Q3 vs. Q2.
Meantime, business-oriented sectors more sensitive to fiscal concerns saw weak job gains or losses. Manufacturers hired 13,000 after cuts in August and September. But growth was mostly in food, beverage and wood products.
Makers of machinery, fabricated metals, communications gear and electrical equipment shed payroll. Automakers also continued to cut employment, despite solid consumer demand that has boosted jobs at dealerships.
Governments reduced staffing by 13,000, but layoffs have eased from prior months.
Uncertainty over the fiscal cliff has hurt job growth, but other policy questions will linger well after the election, notes Dan North, North America chief economist at Euler Hermes.
How financial regulations will be spelled out, what ObamaCare will cost when most provisions go into effect, and how taxes will look under an eventual debt-reduction plan will still weigh on the economy, causing it to expand just 2% in 2013, he says.
"You've got a number of head winds there," he said. "This stuff is not going to clear up quickly."