RPT-PREVIEW-Fewer US jobs seen lost in Oct, jobless rate to rise

(Repeats preview story initially transmitted late Tuesday)

* What: U.S. employment situation report for October

* Nonfarm payrolls seen declining by 175,000

* Unemployment rate forecast rising to 9.9 percent

* When: Friday, Nov. 6 at 8:30 a.m. (1330 GMT)

By Lucia Mutikani

WASHINGTON, Nov 6 (Reuters) - U.S. employers in October cut payrolls by the least amount in 14 months as the economy's resumption of growth boosted optimism, but the jobless rate rose to a fresh 26-year high, a Reuters survey predicts.

The labor market is being closely watched as analysts try to gauge the strength and durability of a government stimulus-driven recovery that started in the third quarter and probably ended the worst U.S. recession since the 1930s.

The survey of 76 economists forecast nonfarm employers cutting 175,000 workers from their payrolls in October, which would be the smallest amount for any month since August 2008. Employers surprised markets by cutting a hefty 263,000 jobs in September.

Despite a moderation in the pace of layoffs from early this year, when nearly three-quarters of a million jobs were lost in January, the unemployment rate is expected to have climbed to 9.9 percent in October from 9.8 percent in September.

"We are getting some indications that companies are starting to feel a little more confident. We expect a continuation of the recent improving trend, but we have a few months to go before we get back on the positive side," said Robert Dye, senior economist at PNC Financial in Pittsburgh.

Measures such as claims for unemployment insurance and the Institute for Supply Management's factory employment index have painted a picture of a labor market moving toward stability in October. Analysts said this data meant fewer jobs may have been lost last month than forecasts suggest.

Still, there is a chance that the unemployment rate will cross the psychological 10 percent mark in October as the improving economic prospects brought discouraged job seekers back into the labor force, analysts said.

A higher-than-expected jobless rate or a bigger loss of jobs than forecast could rattle investors on Wall Street and send them fleeing into the safe haven of U.S. government bonds and the U.S. dollar.

JOBLESS RECOVERY

"It will spark again calls of jobless recovery. How can you reconcile such a positive GDP figure for Q3 and job losses of over 200,000?" said David Dietze, chief investment strategist at Point View Financial Services in Summit, New Jersey.

"It will again create suspicion in investors' mind that it was just a quick sugar high to the economy provided by the cash for clunkers, non-sustainable," he said, referring to an expired government program to spur car sales.

The economy grew at a 3.5 percent annualized rate in the July-September period -- the first expansion in more than a year -- driven largely by government stimulus, including the popular "cash for clunkers" program.

While the program ended in August, it is expected to minimize job losses in the manufacturing sector as automakers boost production to cover depleted inventories.

Hinting at a smaller decline in manufacturing payrolls in October, the employment subindex in the ISM survey rose to 53.1, the highest level since April 2006. It was the first time in 15 months the employment index crossed the 50 threshold to move into growth territory.

Analysts expect further job losses in the retail and services sector, while education and health services continued to expand employment.

October's employment report is expected to show a modest pickup in the average workweek to 33.1 hours from 33 hours the previous month, largely the result of increased auto production.

Analysts said it is worth keeping a close eye on the average workweek, which correlates closely with overall output, to gauge when hiring may resume.

"If you look at all the various measures of slack in the economy, the average workweek, having fallen quite low over the summertime tells us that it can come back up before companies need to hire new workers," PNC Financial's Dye said.

"There is still a lot of slack in the system that will allow for increased production before we need to hire new full-time workers. That will need to be used up before we get back on the positive side of hiring."

Average hourly earnings are expected to rise 0.1 percent after increasing by a similar margin in September. In the 12 months through September, earnings had advanced just 2.5 percent, the smallest increase in more than 4-1/2 years. (Polling by Bangalore polling unit) (Reporting by Lucia Mutikani; Editing by Jan Paschal)