WASHINGTON - The construction and manufacturing industries contributed to a second month of moderate job gains in October, reinforcing the view that a mild expansion is underway.

The Labor Department said Friday that nonfarm payroll jobs increased 177,000, slightly above market expectations, after a revised gain of 162,000 in September.

A separate survey of households shows an unusually large increase of 739,000 people in the labor force that exceeded the number of new jobs, pushing the civilian unemployment rate back up to 6.8% from 6.7%.

Although the figures from the department report triggered a sell-off in the bond market, many analysts said the report was a ho-hum event that did not shake their belief that the economy is doing a little better.

"There is nothing to get excited about. It's a nice report consistent with an economy that's growing moderately," said Lyle Gramley, consulting economist for the Mortgage Bankers Association.

"There was nothing in these numbers that would lead me to change my forecast for the next couple of months," said Joel Prakken, vice president of Lawrence Meyer & Associates in St. Louis. "It was a solid report but not one that was bursting at the seams."

Prakken's firm forecasts that the economy is on a long-term growth path of 2.5% to 3%. Many analysts expect gross domestic product to be even stronger in the last three months of the year, perhaps rising 3.5% or more.

According to the nonfarm payroll figures, most of the increase in employment came on a 114,000 gain in services following two months of smaller gains. Business services, which includes temporary help agencies, gained 84,000, while health care added another 29,000 jobs. Other industries hiring included financial services and wholesale trade.

Construction employment increased by 30,000, the largest gain since May after a relatively flat period of hiring over the summer.

Manufacturing employment rose 12,000, ending a string of losses since February totaling 250,000.

Veronika White, an economist with First Fidelity Bancorporation in Philadelphia, said the rise in factory jobs suggests that the industrial sector has bottomed out. White is looking for a strong increase in industrial production for October, boosted by U.S. automakers.

Other analysts noted that the Labor Department figures showing gains in earnings and hours worked should translate into healthy personal income figures for October. That could in turn support solid consumer spending, which helped propel growth in the middle of the year.

But William Sullivan, senior vice president for Dean Witter Reynolds Inc., cautioned that the report still does not answer the question of what will happen to growth early next year. "The first quarter is still a blank slate," Sullivan said. "If the economy was on the launching pad, you should have been capturing larger gains consistent with past recoveries."

Much of the pickup in manufacturing employment is related to an effort by General Motors to catch up to consumer demand, said Sullivan.

And Fred Sturm, an economist with Fuji Securities Inc. in Chicago, expects that the run-up in auto production will be short-lived. "It's the flavor of the day," Sturm said.

Even with the latest gains in the economy, analysts said members of the Federal Open Market Committee will probably opt to remain neutral on interest rates when they meet Nov. 16 to review monetary policy.

Separately, the Federal Reserve yesterday reported that consumer installment credit unexpectedly surged at a 10.5% annual rate, or $6.68 billion, in September. This was more than double what analysts had predicted. It was the biggest monthly gain in nearly six years and followed strong gains in July and August.

Daryl Delano, a senior economist with Cahners Economics Inc., said that some economists will view the figures favorably because they show consumers are in the mood to spend money, even if they have to borrow to do it. However, Delano said he is concerned that this mini-credit binge will stall spending down the road. "I consider this a red flag," he said.

Revolving credit, which consists mostly of credit card purchases, posted the biggest gain in September, increasing at a 13.5% rate, the Fed reported. Earlier, even larger advances of 17.1% in August and 16.4% in July were recorded.

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