By Ben Leubsdorf

Hiring by U.S. employers remained healthy in October as wage growth accelerated to its strongest pace since the recession, signaling solid momentum in the labor market and broader economy 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 report "was not a shocker, but it was definitely on the strong side, " Amherst Pierpont Securities chief economist Stephen Stanley said in a note to clients. The unemployment rate, derived from a separate survey of American households, tickeddown 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, but remained elevated from its October 2015 level of 62.5% .

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

A 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.

"The solid gain in employment and the acceleration in average hourly earnings growth in October will increase expectations that the Fed will hike interest rates in December," said Paul Ashworth, chief U.S. economist at Capital Economics, in a note to clients. He added, though, that his prediction assumes "that the election doesn't throw a spanner in the works."

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 a month. The overall pace of job creation has slowed in 2016, averaging 181,000 a 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 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 and reaching its lowest level since April 2008.

Hurricane Matthew, which battered the southeastern U.S. last month, offered a potential complication in interpreting the October report due to related evacuations and damage. The Labor Department noted that the hurricane "affected parts of the East Coast during the October reference periods for the establishment and household surveys."

Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients that October's hiring figure "was likely depressed by weather effects."

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.

"If you wanted to show that the economy is still getting better for the typical voter, this report gives you what you needed," said Jed Kolko, chief economist at the job-search website Indeed.

But the report, coming just four days before the election and after tens of millions of votes already have been cast, might have a 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 that 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 and business 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 Estée 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 Fed, 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 that it "judges that the case for an increase in the federal-funds rate has continued to strengthen but decided, for now, to wait for some further evidence of continued progress toward its objectives.

The statement noted that "although the unemployment rate is little changed in recent months, 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 Dec. 13-14.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com.

(END) Dow Jones Newswires

November 04, 2016 10:20 ET (14:20 GMT)

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