* Nonfarm payrolls forecast to increase 190,000 in October
* Unemployment rate seen unchanged at 3.7 percent
* Average hourly earnings expected to rise 0.2 percent
By Lucia Mutikani
WASHINGTON, Nov 2 (Reuters) - U.S. job growth likely rebounded in October, with wages expected to have recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.
The Labor Department's closely watched monthly employment report on Friday is also expected to show the unemployment rate steady at a 49-year low of 3.7 percent. Sustained labor market strength could ease fears about the economy's health following weak housing data and stalling business spending.
Nonfarm payrolls probably increased by 190,000 jobs last month, according to a Reuters survey of economists. Payrolls rose by 134,000 jobs in September, the smallest gain in a year, after Hurricane Florence drenched North and South Carolina, weighing on restaurant and retail employment.
But the anticipated bounce back in job growth is likely to be tempered some what by Hurricane Michael, which struck the Florida Panhandle in mid-October.
"The employment report should help calm some concerns that the economy is slowing more quickly than it really is, the economy is really in good shape," said Ryan Sweet, a senior economist at Moody's Analytics in Westchester, Pennsylvania.
Average hourly earnings are forecast rising 0.2 percent in October after advancing 0.3 percent in September. This would boost the annual increase in the wages to 3.1 percent, the biggest gain since April 2009, from 2.8 percent in September.
Strong annual wage growth would mirror other data published this week showing wages and salaries rising in the third quarter by the most since mid-2008. Hourly compensation also increased at a brisk pace in the third quarter.
Firming wages support views that inflation will hover around the Fed's 2.0 percent target for a while. The personal consumption expenditures price index excluding the volatile food and energy components has increased 2.0 percent for five straight months.
The Fed is not expected to raise rates at its meeting next Wednesday, but economists believe strong labor market data could see the U.S. central bank signal an increase in December. The Fed raised borrowing costs in September for the third time this year.
"I suspect that by mid-2019, labor compensation gains will be at levels that would worry the Fed members," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "If that is the case, those who are hoping for only one or two rate hikes next year may be disappointed."
Employers, scrambling to find qualified workers, are boosting wages. There are a record 7.14 million open jobs.
Online retail giant Amazon.com Inc announced last month that it would raise its minimum wage to $15 per hour for U.S. employees starting in November. Workers at United States Steel Corp are set to receive a hefty pay rise also.
The prospect of interest rates rising faster than financial markets anticipate has roiled the U.S. stock market and a strong report on Friday could renew selling on Wall Street. The Standard & Poor's 500 index dropped 6.9 percent in October, the biggest decline in seven years.
Employment gains have averaged 208,000 jobs per month this year, double the roughly 100,000 needed to keep up with growth in the working-age population. That is seen supporting the economy through at least early 2019 when gross domestic product is expected to significantly slow as the stimulus from the White House's $1.5 trillion tax cut package fades.
Last month, employment in the leisure and hospitality sector likely rebounded after declining by 17,000 jobs in September, the first drop in year.
Retail payrolls probably remained weak, weighed down by layoffs related to Steinhoff's Mattress Firm bankruptcy as well as some store closures by Sears Holdings Corp.
Further gains are anticipated in manufacturing jobs after the sector added 18,000 positions in September, but a measure of factory employment fell last month suggesting some slowdown in the pace of hiring.
Construction companies probably hired more workers in October. Jobs in the sector have been increasing despite weakness in the housing market. Government payrolls are expected to have increase by 7,000 jobs in October.
Reporting by Lucia Mutikani; editing by Clive McKeef