Unemployment probably rose from a three-year low in October as U.S. employers curbed hiring on concern growth will suffer if lawmakers fail to avert tax increases and spending cuts slated to take effect next year, economists said before a report today.

In the last employment report before next week’s election, the jobless rate climbed to 7.9 percent, the first increase in three months, from 7.8 percent in September, according to the median forecast of 91 economists surveyed by Bloomberg. Payrolls grew by 125,000 workers last month following a 114,000 gain, the survey showed.

“We’re adding enough jobs to tread water but not to make much progress in bringing down the slack that remains,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. “The labor market is consistent with the middling growth we’ve seen in the overall economy.”

Employers have little reason to boost staff as global demand slows and the so-called fiscal cliff of tax increases and spending cuts raise the risk the expansion will sputter next year. The report comes before Americans go to the polls on Nov. 6 to decide whether to give President Barack Obama another four years or change course with Republican challenger Mitt Romney.

The Labor Department’s figures will be issued at 8:30 a.m. in Washington. Payroll projections in the Bloomberg survey ranged from gains of 30,000 to 154,000. An average of 146,000 jobs a month were added in the third quarter.

The report may show private payrolls, which exclude government jobs, probably climbed by 123,000 in October after rising 104,000 the prior month, according to the Bloomberg survey.

Survey Results

Forecasts for the unemployment rate ranged from 7.7 percent to 8 percent. The unemployment rate in September matched the level when Obama took office in January 2009. It exceeded 8 percent for 43 months prior to September, the longest such stretch since monthly records began in 1948.

The most recent polls suggest the race for the presidency is in a dead heat. The Washington Post/ABC News national tracking poll released Oct. 31 showed Romney and Obama tied at 49 percent among likely voters. An aggregation of national polls compiled by the website RealClearPolitics also showed a tied race, with each candidate at 47.4 percent.

Ronald Reagan is the only president to have been re-elected since World War II with a jobless rate above 6 percent. The rate was 7.2 percent on Election Day 1984, having dropped almost 3 percentage points in the previous 18 months. Assuming the rate is 7.9 percent in October this year, the rate would have dropped 1.1 points in the same period under Obama.

Gaining Confidence

While torn about who will be president, Americans have grown more optimistic about the U.S. economy, an indication the labor market may be improving for some.

Spending by households climbed in September by the most in seven months. The Thomson Reuters/University of Michigan consumer sentiment index (S15MACH) 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.

Businesses, on the other hand, appear more worried about the weak global economy and the fiscal cliff and have begun cutting back. Spending on equipment and software was unchanged in the third quarter, the weakest reading in three years, a report from the Commerce Department showed on Oct. 26.

Cummins Inc. (CMI) said Oct. 31 it will reduce its headcount by 1,000 to 1,500 by the end of the year after revenue dropped 14 percent in the third quarter from a year earlier. The maker of heavy-truck engines said shipments fell 26 percent last quarter, and production and new orders have come in weaker than expected.

‘Significantly Weaker’

“We are experiencing significantly weaker demand in many of our largest markets,” Tom Linebarger, chairman and chief executive officer of the Columbus, Indiana-based company, said on a call after the earnings release.

“End users are reluctant to proceed with new purchases, apparently due to uncertainty about the U.S. economy and concerns about possible impacts from the fiscal cliff,” he said. “There is also a high degree of uncertainty about the direction of the global economy, and at this point in time it is not clear when demand will improve.”

Shares of retailers and manufacturers reflect the split between households and businesses. The Standard & Poor’s Supercomposite Retailing Index has risen 24.6 percent so far this year, outpacing a 12.3 percent gain in the S&P’s Industrial Machinery Index over the same period.

Cuts in public spending are also hurting employment at government contractors, showing what could happen in the event the fiscal cliff materializes, unleashing $607 billion in federal spending cuts and tax increases set to start in 2013 unless Congress and the president can reach a compromise.

Spending Cuts

Oshkosh Corp. (OSK), the Wisconsin-based company that makes commercial trucks and supplies blast-resistant trucks to the U.S. Army and Marine Corps, said Oct. 26 it would cut 450 jobs in January due to lower demand from the Defense Department. Rockwell Collins Inc. (COL) said it plans to cut 1,250 employees, or about 6 percent of its workforce, in the next year as the aerospace manufacturer’s defense revenue falls amid curtailed U.S. military spending.

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.

                        Bloomberg Survey
================================================================
                           Nonfarm  Private     Manu Unemploy
                          Payrolls Payrolls Payrolls     Rate
                            ,000’s   ,000’s   ,000’s        %
================================================================

Date of Release              11/02    11/02    11/02    11/02
Observation Period            Oct.     Oct.     Oct.     Oct.
----------------------------------------------------------------
Median                         125      123       -4     7.9%
Average                        122      123       -3     7.9%
High Forecast                  154      157       10     8.0%
Low Forecast                    30       74      -15     7.7%
Number of Participants          91       51       24       88
Previous                       114      104      -16     7.8%
----------------------------------------------------------------
4CAST                          145      150     ---      7.9%
ABN Amro                       130      130     ---      8.0%
Action Economics               120      125       -5     7.9%
Aletti Gestielle               120     ---      ---      ---
Ameriprise Financial           115      110      -10     7.9%
Banca Aletti                   125      140       -2     7.8%
Bank of the West               122      125      -10     7.8%
Bank of Tokyo-Mitsubishi       130      140     ---      7.8%
Banorte-IXE                    125     ---      ---      8.0%
Bantleon Bank AG               125     ---      ---      7.9%
Barclays                       125      130     ---      7.8%
Bayerische Landesbank          124     ---      ---      7.9%
BBVA                           125      130       -6     7.9%
BMO Capital Markets            130     ---      ---      7.9%
BNP Paribas                    125      120     ---      7.9%
BofA Merrill Lynch              90      100     ---      7.9%
Briefing.com                   135      145     ---      7.9%
Capital Economics              125     ---      ---      7.8%
CIBC World Markets             136     ---      ---      7.9%
Citi                           120     ---      ---      7.9%
ClearView Economics            120      120      -10     7.9%
Comerica                       120     ---      ---      7.8%
Commerzbank AG                 140      140     ---      7.9%
Credit Agricole CIB            130     ---      ---      7.9%
Credit Suisse                  125      125     ---      7.9%
CTI Capital                    131     ---      ---      ---
Daiwa Securities America       125     ---      ---      7.9%
Danske Bank                    125      123     ---      7.9%
DekaBank                       100     ---      ---      7.9%
Desjardins Group               140     ---      ---      8.0%
Deutsche Bank Securities       125      125     ---      7.9%
Deutsche Postbank AG           130     ---      ---      7.9%
Exane                          140     ---      ---      7.9%
First Trust Advisors           120      120       -5     7.8%
FTN Financial                  125      115     ---      7.8%
Goldman, Sachs & Co.           125     ---      ---      7.9%
Hammer Partners                120     ---      ---      7.8%
Helaba                         125     ---      ---      7.9%
High Frequency Economics       100     ---      ---      7.9%
HSBC Markets                   125      120        8     7.9%
Hugh Johnson Advisors           84       74        0     7.9%
IDEAglobal                     135      130       10     7.8%
IHS Global Insight             125     ---      ---      7.9%
Informa Global Markets         125     ---       -10     8.0%
ING Financial Markets          140      140      -10     7.9%
Insight Economics              135     ---      ---      7.8%
Intesa Sanpaulo                110     ---      ---      7.9%
J.P. Morgan Chase              135      140       -5     7.8%
Janney Montgomery Scott         94      104        0     8.0%
Jefferies & Co.                110      115        2     7.9%
John Hancock Financial         154     ---      ---      7.9%
Landesbank Berlin              100     ---      ---      8.0%
Landesbank BW                  100     ---      ---      7.9%
Lloyds Bank                     95      100     ---      7.9%
Maria Fiorini Ramirez          120      125     ---      ---
Market Securities              140     ---      ---      7.8%
MET Capital Advisors           102     ---      ---      7.9%
Modal Asset                   ---       123     ---      ---
Moody’s Analytics              135      150      -15     7.9%
Morgan Stanley & Co.           130      130     ---      7.9%
National Bank Financial        110     ---      ---      7.9%
Natixis                        125     ---      ---      7.8%
Nomura Securities              145      130        3     7.7%
Nord/LB                        110     ---        -5     7.8%
OSK Group/DMG                  130     ---      ---      7.9%
Oxford Economics               106      100        7     7.9%
Paragon Research               140     ---      ---      7.9%
Pierpont Securities            105       90     ---      7.9%
PineBridge Investments         125     ---      ---      7.9%
PNC Bank                       150     ---        10     7.9%
Prestige Economics             145      135     ---      7.9%
Raiffeisenbank International   145      150     ---      7.8%
Raymond James                  125      120     ---      7.8%
RBC Capital Markets            120      115     ---      7.9%
RBS Securities                 125      120     ---      7.9%
Regions Financial              124      116       -6     8.0%
Renaissance Macro Research     100      105     ---      7.9%
Scotiabank                     100     ---      ---      7.9%
SISR                           153      157     ---      7.9%
SMBC Nikko Securities          150      130     ---      7.8%
Societe Generale                90       90     ---      7.7%
Southern Polytechnic State     120      120     ---      7.9%
Standard Chartered             147      152     ---      7.9%
Stone & McCarthy               115      110        0     7.8%
TD Securities                  115      115        0     7.9%
UBS                            120      125     ---      7.9%
UniCredit Research             140     ---      ---      7.9%
Union Investment               115     ---      ---      8.0%
University of Maryland         113      118       -3     7.9%
Wells Fargo & Co.               96     ---      ---      7.8%
Westpac Banking Co.             30     ---      ---      8.0%
Wrightson ICAP                 120      120     ---      7.8%
================================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net