By Ben Leubsdorf and Josh Mitchell

WASHINGTON--Hiring by U.S. employers remained steady in October as the unemployment rate edged down and wage growth accelerated to its strongest pace since the recession, signaling solid momentum in the labor market just days before American voters elect a new president.

Nonfarm payrolls rose by a seasonally adjusted 161,000 in October from the prior month, following September's upwardly revised gain of 191,000, the Labor Department said Friday.

The unemployment rate, derived from a separate survey of American households, ticked down to 4.9% last month from 5% in September because the labor force shrank. The labor-force participation rate edged lower, to 62.8% in October from 62.9% the prior month.

Economists surveyed by The Wall Street Journal had expected 173,000 new jobs and a jobless rate of 4.9% in October.

One highlight from Friday's report: Average hourly earnings for private-sector workers rose 2.8% in October compared with a year earlier, the strongest annual wage growth since June 2009.

The report, with its evidence of a tightening labor market, likely keeps the Federal Reserve on track to potentially raise rates at its mid-December policy meeting.

Revisions added a total of 44,000 jobs to earlier payroll estimates for August and September. Hiring over the past three months averaged 176,000 per month. The overall pace of job creation has slowed in 2016, averaging 181,000 per month through October versus 229,000 for all of 2015.

Job gains were broad across most sectors of the economy in October, though employment fell in some industries including manufacturing, retail trade and mining and logging.

Wages continued to rise as the labor market tightened and employers competed to hire and retain workers. Average hourly earnings for private-sector workers rose 10 cents from September, or 0.4%, to $25.92 in October. Economists had expected a 0.3% increase on the month.

The Labor Department said the average workweek last month was unchanged from September.

A broad measure of unemployment and underemployment, known as the U-6, including Americans working part-time jobs who want full-time positions, was 9.5% in October, dropping from 9.7% from the prior month.

Hurricane Matthew, which battered the southeastern U.S. last month, offered a potential complication in interpreting the October report because related evacuations and damage might have affected the household and establishment surveys used to generate the key estimates for unemployment and nonfarm payrolls. Some economists had said theyexpected the hurricane would be a modest drag on employment growth in October, but others said they expected no significant impact.

The Labor Department flagged in the report that the hurricane "affected parts of the East Coast during the October reference periods for the establishment and household surveys."

Friday's report was the last major economic indicator to be released before Election Day. It came after the Commerce Department last week reported U.S. economic growth accelerated during the third quarter following a modest stretch in late 2015 and early 2016.

Voters on Tuesday will decide the balance of power in Congress and select President Barack Obama's successor in the White House. Recent polls have shown a tightening race between Democrat Hillary Clinton and Republican Donald Trump.

But the report, coming just four days before the election and after tens of millions of votes already have been cast, might havea muted impact on the campaign.

Some business executives and economists have warned that uncertainty stemming from the election could be making firms cautious about investing in workers or capital projects. A survey released last month by the National Association for Business Economics found 13% of firms had postponed hiring or investment decisions pending election results, including nearly 1 in 4 businesses with 100 or fewer employees.

Staffing and placement firm Kforce Inc. reported this week that its direct-hire revenues were down 4.4% in the third quarter from the prior period, and another decline was expected in the final three months of the year. "It is an election year, and we've gone back and looked historically during election years, there is a little bit more uncertainty so you see a little bit more pause," Kforce President Joseph Liberatore told analysts on Tuesday.

If the election has been a headwind for hiring andbusiness investment, job creation and overall growth could pick up in the coming months.

"It certainly is difficult to predict the environment, certainly most near-term here in the U.S.," said Tracey Travis, chief financial officer at Estee Lauder Cos., on a Wednesday call with analysts. "But at least the election uncertainty will be over next week, and we can move forward.

Stronger growth would be welcome news for the Federal Reserve, which held short-term interest rates unchanged this week but sent fresh signals that it is on track to nudge rates higher at its next policy meeting in mid-December

The Fed said Wednesday in a statement it "judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives."

The statement noted that "although the unemployment rate is little changed in recentmonths, job gains have been solid." Fed Chairwoman Janet Yellen had welcomed a rise in labor-force participation over the past year as evidence that a tightening job market is drawing Americans back into the workforce without generating intense pressure on wages and prices that might force the Fed to raise interest rates quickly to control inflation.

"We're not seeing strong pressures on utilization suggesting overheating, and my assessment would be, based on this evidence, that the economy has a little more room to run than might have been previously thought," Ms. Yellen said in September. "That's good news."

Fed policy makers will collect additional data on the economy, including the November jobs report due out Dec. 2, before their next meeting on Dec. 13-14.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

November 04, 2016 09:28 ET (13:28 GMT)

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