(Bloomberg) — American employers added more workers than forecast in October and a rush of people entering the labor force pushed the jobless rate higher, according to the last report on the labor market before this week’s presidential election.

Broad-based gains in employment — from car dealers and hospitals to factories and construction sites — indicate consumers are likely to spend more freely and shore up the three-year expansion in the face of a global economic slowdown and political gridlock in Washington over taxes and spending.

Hiring increased by 171,000 workers after a 148,000 gain in September that was bigger than first estimated, Labor Department figures showed Friday in Washington. October’s increase exceeded the most optimistic forecast in a Bloomberg survey with a median projection of a 125,000 gain. Unemployment rose to 7.9%.

“Jobs are expanding despite all this expression of business caution,” says Maury Harris, chief economist at UBS Securities LLC in New York. “You continue to see improvements in people’s perceptions of what’s happening in the job market.”

Private payrolls, which exclude government agencies, climbed by 184,000 last month, the most since February. They were forecast to advance by 123,000.

Government payrolls decreased by 13,000. Retailers took on 36,400 employees, the most since April 2011. Temporary hiring rose by 13,600.

Alan Krueger, chairman of President Barack Obama’s Council of Economic Advisers, says that the jobs figures provide “further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression.”

Republican challenger Mitt Romney emphasizes that the unemployment rate in October was higher than the 7.8% when Obama took office in January 2009, saying in a statement that the report “is a sad reminder that the economy is at a virtual standstill.”

Nationwide, the most recent polls suggest the race is in a dead heat.

While employment improved last month, compensation lagged behind. Average hourly earnings climbed 1.6% in October from the same time last year, the smallest gain since comparable year-over-year records began in 2007, Friday’s report showed. Earnings for production workers rose 1.1% in the 12 months to October, the weakest since records began in 1965.

The gain in payrolls so far this year has averaged 157,000 a month, little changed from the 153,000 average for 2011. Monthly employment gains in 2010 averaged 86,000.

The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — decreased to 14.6% from 14.7%.

An improving job market has boosted consumer confidence, helping to drive the biggest increase in household spending in seven months in September. Consumer purchases account for 70% of the economy.

The Thomson Reuters/University of Michigan consumer sentiment index rose last month to the highest level since before the recession began five years ago. The Conference Board’s index reached the highest level since February 2008.

At the same time, the weak global economy and the so-called fiscal cliff -- more than $600 billion of tax increases and budget cuts scheduled to take effect next year unless Congress acts -- have prompted some companies to begin cutting back.

Unless the cliff is averted, “it’s going to be a major hit to consumer spending that could knock the economy back into recession,” says Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “So we still have that dark cloud hanging over the economy. If that cloud is cleared up a little bit, and I expect it will be, then yes, I think these gains can be sustained.”

Warning that they can’t combat a slowdown in growth caused by stricter fiscal policy, Federal Reserve officials said Sept. 13 the central bank would hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The Fed also began a third round of stimulus, buying $40 billion in mortgage bonds a month.

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