05:21 PM EST on Friday, November 5, 2004

By LEIGH STROPE
AP Labor Writer

WASHINGTON, D.C. — Employers went on a hiring spree in October, adding 337,000 new jobs, many of them for hurricane cleanup. The surge was the largest in seven months, a sign the jobs recovery may have taken hold.

More people resumed their job searches, expanding the pool of people wanting work and sending the unemployment rate up slightly to 5.5 percent from 5.4 percent, the Labor Department also reported Friday from a separate survey of households.

Economists were surprised and elated about the net increase in jobs, but also cautious. They had forecast an increase of about 175,000 in the department's survey of employers' payrolls. August and September employment also was revised higher by about 113,000.

"This report is really telling us the economic expansion is solidly in place," said Anthony Chan, senior economist with JPMorgan Fleming Asset Management. "For those naysayers who were expecting recession next year, this certainly defies those expectations."

But economists noted that much of the boost came from jobs related to the aftermath of four hurricanes that struck Florida and the Southeast in August and September. Construction employment was up 71,000 last month.

"The October figures may suggest a stronger labor market than actually exists," said Oscar Gonzalez, economist with John Hancock Financial Services. Monthly increases of about 200,000 are more realistic through the end of the year, analysts said.

"While we still have plenty of lost jobs to make up, this report is bound to boost spirits and hopefully spending as we head into the holiday season," Gonzalez said.

On Wall Street, the better-than-expected report boosted stocks, extending the rally for a ninth straight session. The Dow Jones industrial average closed up 72 points and the Nasdaq gained 15 points.

The report also was good news for President Bush as he prepares for a second term. A generally weak jobs market had plagued his re-election campaign, providing a political target to his Democratic challenger, John Kerry.

Kerry and other Democrats often criticized Bush for jobs lost during his watch, the first president to do so since Herbert Hoover as the Great Depression set in. Bush now is 371,000 short of closing the jobs deficit and has a second term to work with.

October's 337,000 jobs gain was the largest since March, when employment jumped by 353,000.

The Bush administration quickly took credit.

"There can be no doubt that President Bush's tax relief, combined with good monetary policy, the strength of our small-business sector and our outstanding work force has led to a growing economy that is producing good jobs for American families," Treasury Secretary John Snow said.

Democrats welcomed the jobs increase, but noted that recent hiring has been by federal, state and local governments despite Republicans' traditional desire for smaller government. Private sector employment still is down by a net 1.3 million, including 2.7 million manufacturing jobs. Almost 8.1 million people are unemployed.

The administration needs to "take a sober look at the plight of working families," said AFL-CIO President John Sweeney, citing rising health care costs and stagnant wages. "Workers deserve economic policies that will improve their standard of living and provide sufficient time with their families."

The number of people holding more than one job rose by 519,000 to 8 million. The average time for the unemployed to find a job was 19.6 weeks, the same as in September.

The jobless rate for blacks jumped to 10.7 percent last month, up from 10.3 percent in September. The rate for Hispanics fell to 6.7 percent from 7.1 percent, while the rate for teenagers grew to 17.2 percent from 16.6 percent. The rate for whites held at 4.7 percent.

Manufacturing was the only major sector to lose jobs last month, with employment falling by 5,000. That followed a decline of 14,000 in September.

New hiring in professional and business services, with 97,000 jobs added, helped strengthen overall job growth last month. Half that increase was in temporary employment services.

Bush administration critics argue that new jobs are being created in low-paying industries that typically do not offer health insurance or many other benefits. Economists view a rise in temporary employment jobs as positive, contending that it indicates future hiring.

"People hire temps first and hire full-time workers later," said David Wyss, chief economist at Standard & Poor's.

Analysts think the Federal Reserve, which meets next week, will raise short-term interest rates for a fourth time this year. The expectation is that the Fed will push up a key rate from 1.75 percent to 2 percent.

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On the Net:

Bureau of Labor Statistics: http://www.bls.gov

AP-WS-11-05-04 1702EST