* Democrats and Republicans both claim benefit from report
* Presidential race has tightened to dead heat
* Romney's chances drop, Obama's rise on Intrade
* Only 7 percent of voters undecided in last days of close race
WASHINGTON, Nov 2 (Reuters) - An encouraging October jobs report may give President Barack Obama an 11th-hour campaign boost, but perhaps more importantly it denies Republican challenger Mitt Romney an opportunity to put an exclamation point on his argument that Obama has failed to turn around the economy.
U.S. employers added 171,000 people to their payrolls last month, significantly higher that the 125,000 figure analysts had expected.
The jobless rate edged up a tenth of a point to 7.9 percent, due to workers surging back into the labor force.
Friday's Labor Department report was more modest than last month's stunning figure that pushed the unemployment rate down to 7.8 percent from 8.1 percent, the lowest since 2009.
That fall was such a boost to Obama ahead of the Nov. 6 election that it spawned some quickly discredited conspiracy theories, including from former General Electric chairman Jack Welch, that the White House had somehow manipulated the job figures for political gain.
This time around, the figure was neither so good nor all that bad, giving Republicans little to work with, although they did stick with the message that this is not what a real recovery looks like.
Romney called the uptick in the unemployment rate a ``sad reminder'' that the economy continues to struggle, and said that, as president, he would ``make real changes that lead to a real recovery.''
The White House said data showing hiring increased in October proved that the economy was on the mend, and stressed the need to re-elect Obama next Tuesday.
Analysts said the report would likely help Obama.
``The October report... confirmed a narrative that the economy is expanding moderately,'' Greg Valliere, chief political strategist at Potomac Research Group, said in a note to clients.
``The Obama camp can't celebrate, because the unemployment rate ticked up to 7.9 percent - but it's difficult to see how the Romney camp can make hay with a report that shows a 171,000 rise in nonfarm payrolls,'' Valliere said.
PUTTING THE ECONOMY BACK IN THE NEWS
Romney's odds of victory fell - and Obama's odds for re-election rose - on the Intrade prediction market after the jobs report. In early Friday action, traders saw a 32.5 percent chance of Romney winning on Tuesday, down 4.4 percent from Thursday's close.
They put the chances of an Obama victory at 67.6 percent, up 1.5 percent from Thursday.
``This jobs report couldn't have come at a better time for the president,'' said Jim Kessler, senior vice president for policy at Third Way, a centrist Democratic think tank.
``It continues a streak of mostly good economic news on jobs, housing, retail, and consumer confidence. Public opinion polls have shown an uptick in voter optimism about the economy. This report validates that optimism.''
If one candidate had a solid lead, a middling unemployment report might not make a difference this late in the campaign.
But this year, with opinion polls showing a deadlocked race and about 7 percent of voters still undecided, it could tilt the race even if only a fairly small number of people are paying attention.
``This is such a tight race. Everything matters,'' Republican strategist Ford O'Connell said. ``Anything that pushes one or two people out there, that benefits either candidate.''
O'Connell said the report would help Romney. It makes the economy a focus of news reports, helping the former private equity executive make his case that he is better equipped than Obama to fix the economy and work with both parties in the U.S. Congress on issues like lowering the budget deficit.
``Americans aren't going to feel better or worse about the economy, but it should help him bolster his closing argument, the idea that it allows him to say 'I have a five-point plan to help America recover faster,''' O'Connell said.