The economy and President Barack Obama received some good news Friday, as the unemployment rate dipped below the 8 percent mark for the first time during Obama’s presidency.
According to the latest jobs report released by the Labor Department on Friday, U.S. unemployment is now at 7.8 percent, down from 8.1 percent in August. This represented a gain of 114,000 jobs, surprising economists who generally predicted less-than-substantial gains. That’s not the only good news: Revisions to previous reports showed that 86,000 new jobs in July and August were previously unaccounted for. The combination shows a net gain of 200,000 jobs.
Such a large boost helped push the Dow Jones industrial average to a five-year high Friday. The index has increased 17 percent this year — another sign of economic recovery.
The gain also reflects well on President Obama during the time he most needs a boost. After performing poorly in Wednesday’s presidential debate, Obama needed this economic uptick to help him on Election Day.
Net Gain of Jobs
Official labor benchmarks – including September’s net gain of 114,000 jobs – are based on a monthly survey of businesses and reflect how many new jobs were created.
But this only tells part of the story. The Labor Department also performs monthly surveys of households, considered a better marker for job growth. This month’s survey of households was vastly different from the business survey, showing a net gain of 873,000 jobs. This number, which represents how many people found jobs, is the reason for the significantly changed unemployment rate. Two-thirds of those jobs gained are part time, leaving a net increase of 291,000 full-time workers.
Labor Force Fluctuations
The unemployment rate can decrease in one of two basic ways: Either previously unemployed individuals found jobs, or those who were considered unemployed have opted to take themselves out of the labor force, a popular decision at the peak of the Great Recession. But the September jobs report reflects true improvement: More individuals have actually entered or re-entered the labor force, so experts say the decreased jobless rate is a sign that the economy is genuinely improving.
Sectors like health, education and finance continued to grow. Areas hit hardest by the recession – especially manufacturing and construction – stayed relatively constant in September or experienced minor losses.
What the Jobs Report Means for the Election
The sharp drop in unemployment is good news not only for the economy but also for President Obama. After he effectively lost this week’s debate to Republican candidate Mitt Romney, many expected the jobs report to show no economic growth and give Obama’s campaign another blow. Instead, the positive report may help solidify his slight lead in the polls.
Experts are careful to put the report into perspective. While it may undo some of the damage done to the Obama campaign during the debate, a single jobs report is unlikely to affect the election significantly.
Likewise, although falling below 8 percent unemployment is an important milestone, the nation still faces a weak economy with modest growth. At the current growth rate, the economy would still need several more years to recover to healthy unemployment rates, but the economy is picking up steam.
The country has experienced an average growth of 150,000 new jobs per month over the last 12 months. This is a huge leap from the 85,000 monthly new jobs in 2010 and the average loss of 422,000 jobs per month in 2009.
- Leonhardt, D. (2012, October 5). Jobs Report Brings Unexpected Good News for Obama. The New York Times. Retrieved from http://thecaucus.blogs.nytimes.com/2012/10/05/jobs-report-brings-unexpected-good-news-for-obama/
- Matthews, D. (2012, October 5). The jobs report in six charts. The Washington Post. Retrieved from http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/05/the-jobs-report-in-six-charts/
- Reuters. (2012, October 5). US Stocks: Dow hits five-year high on strong jobs report. Retrieved from http://uk.reuters.com/article/2012/10/05/markets-usa-stocks-idUKL1E8L587A20121005