Saturday, October 13, 2012

THE ECONOMY: Unemployment Rate Falls to 7.8%

WASHINGTON—The U.S. unemployment rate fell to its lowest level in more than 3½ years in September as the economy continued to add jobs, a potential boost for President Barack Obama's campaign to win a second term.

The politically important unemployment rate fell to 7.8% last month from 8.1% in August. That was the lowest level since January 2009.

U.S. payrolls, obtained in a separate survey of employers, increased by a seasonally adjusted 114,000 jobs last month, the Labor Department said Friday.

Economists surveyed by Dow Jones Newswires expected a gain of 118,000 in payrolls and an 8.1% jobless rate.

Friday's report is the first since the Federal Reserve's decision to commence an ambitious stimulus program—buying $40 billion a month of mortgage-backed securities until the U.S. job market substantially improves. The latest numbers offer some good news with the falling unemployment rate but also suggests that job creation, while steady, remains slower than the Fed would like.

The figures are also the next-to-last snapshot of the labor market before the November election. October's employment numbers are due out only four days ahead of the vote—possibly too late to sway many ballots.

"The September jobs report will frame the economic debate and could prove critical to the election outcome," Carl Riccadonna, senior U.S. economist at Deutsche Bank, DBK.XE +1.06% said ahead of Friday's release.

Mr. Obama and Republican challenger Mitt Romney have sparred over whose economic
policies would lay the best foundation for job creation.

At Wednesday's debate, Mr. Romney criticized the president for presiding over a period of high unemployment and stagnant wages that he said has squeezed middle-class families.

"If I'm president I will create—help create—12 million new jobs in this country with rising incomes," Mr. Romney said.

Mr. Obama highlighted steady growth: The private sector has added nearly five million jobs since February 2010. And he called for a "new economic patriotism" that embraces spending on education, training, energy and other areas to speed the recovery.

In a sign of stronger growth, August and July payroll numbers were revised up—August payrolls rose 142,000 compared with the initially reported 96,000, and July was up 181,000 versus an earlier estimate of 141,000.

Jeremy Zirin, Chief U.S. Equity Strategist for UBS Wealth Management, reviews the September employment data and looks at what the data mean for the economy. Photo: Getty Images.

The payroll numbers and unemployment figures are obtained by separate surveys—they sometimes diverge in the short-term but generally move in the same direction. The unemployment rate is obtained in a survey of households, which tends to be more variable because of a smaller sample size.

Previously, changes in the rate have reflected people dropping out of the work force. That wasn't the case in September.

Private companies accounted for most of the growth in September payrolls, adding 104,000 jobs.

In the private sector, employment increased in health care as well as transportation and warehousing. Manufacturing employment fell by 16,000.

Governments, meanwhile, added 10,000 positions as the federal and state-level workforces grew.

So far this year, overall job growth has averaged 143,000 a month, compared with 153,000 in 2011.

Average earnings rose by seven cents to $23.58 an hour, while the average workweek edged up by 0.1 hour to 34.5 hours in September.

A broader measure of unemployment—which includes job seekers as well as those in part-time jobs--held steady at 14.7% in September.

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