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UPDATE - US job cuts surge 125 percent in Oct.-Challenger
Tuesday November 4, 11:56 am ET

(Recasts lead, adds economists comments, background, Tyco job cuts)

NEW YORK, Nov 4 (Reuters) - The number of job cuts announced by U.S. employers more than doubled in October, after declining for two months, calling into question the strength of job market as other segments of the economy surge.

Planned layoffs at U.S. firms shot up to 171,874 jobs in October, from 76,506 in September, job placement firm Challenger, Gray & Christmas said on Tuesday. Layoffs were at their highest since Oct. 2002, when 176,010 job cuts were announced.

Some economists say the data may not provide a complete picture of the labor market, but investors seeking clues about Friday's employment report sent bond prices higher after the Challenger report.

"With factors like technology, outsourcing, and consolidation working against job creation, any job market rebound we see in the near future will be relatively small," said John Challenger, chief executive at Challenger, Gray & Christmas, in a statement.

In a signal that the job market may face another difficult month in November, Tyco International Ltd. (NYSE:TYC - News) on Tuesday said it would eliminate 7,200 jobs as it dismantles its far-flung global empire.

"We're not out of the woods yet with regard to the labor market," said Lehman Brother economist Drew Matus.

The job market won't really turn the corner until the economy shows a few quarters of strong growth, Matus said.

But some economists believe that the layoff numbers do not necessarily indicate a sour labor market.

Higher layoffs at larger companies could be offset by more robust hiring at small and medium-sized firms, said Sung Won Sohn, chief economist at Wells Fargo & Co.

The Challenger report clashes with other signals that the labor market has shown signs of stabilizing.

The September employment report showed that employers increased the number of workers on their payrolls by 57,000, the first increase since January.

In addition, last week the number of initial jobless claims fell to 386,000, the fourth straight week that claims were under 400,000, which economists consider as a critical level for the labor market.

A report on the manufacturing sector on Monday said the pace of factory job cuts was slowing.

Analysts are eagerly awaiting Friday's report payrolls and unemployment. According to a Reuters poll, economists on average forecasted payrolls increased by 55,000, and unemployment held steady at 6.1 percent.

(Additional reporting by Kevin Plumberg)