Nov. 4 (Bloomberg) -- Employers in the U.S. announced the fewest job cuts in 17 months in October, a sign companies are holding on to workers in anticipation of an economic recovery.

Planned firings fell 51 percent last month to 55,679 from 112,884 in October 2008, a fifth consecutive year-on-year decline and the largest since July 2006, Chicago-based placement firm Challenger, Gray & Christmas Inc. said today. Announcements were down 16 percent from the prior month.

Job losses are declining as the economy emerges from the recession, posting its first quarter of growth in a year. Even so, companies aren’t hiring, and economists surveyed by Bloomberg News expect the unemployment rate will keep rising into the first three months of next year.

“The continued decline in job-cutting activity across most industries is a positive sign that the economy is slowly improving,” John A. Challenger, chief executive officer of the placement company, said in a statement. “However, it is important to realize that, as deep and widespread as this recession was, it is going to be a long and sometimes painful recovery.”

The announced job cuts were led by reductions at automotive companies, which totaled 13,420 in October, electronics firms and computer companies.

Chrysler Buyouts

Chrysler Group LLC said last month it is again offering all of its U.S. hourly workers represented by the United Auto Workers union early retirement and buyout incentives to leave the company. The company had approximately 26,800 hourly workers as of June.

Johnson & Johnson, the world’s largest health-production company, said Nov. 3 it will shrink its workforce by 6 percent to 7 percent, affecting more than 7,000 workers, as consumers cut spending on items ranging from drugs to skin care. Demand won’t pick up until unemployment eases and people become less cautious, Chief Executive Officer Bill Weldon said on a conference call.

When you look at the total economic environment, “I don’t think anybody is expecting it to come roaring back tomorrow,” Weldon said.

A report in two days may show employers in October cut the fewest jobs in more than a year, according to economists surveyed.

Falling Payrolls

Payrolls probably fell by 175,000 workers in October, according to the median forecast in a Bloomberg News survey. That would follow a 263,000 decline in August and compare with a monthly average of about 560,000 in the first half of 2009.

The jobless rate probably rose to 9.9 percent last month, according to the survey, the highest since 1983. Economists in a separate Bloomberg survey last month said unemployment will exceed 10 percent by early 2010.

The economy has already lost 7.2 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.

The Challenger report on firings does not always correlate with figures on payrolls or first-time jobless claims as reported by the government.

Many job cuts are carried out through attrition or early retirement. Some employees whose jobs are eliminated find work elsewhere in their companies, and many announced staff reductions never take place because business improves.

Challenger’s totals also include foreign affiliates.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: November 4, 2009 07:30 EST