Unemployment Rate Drops to 7.8% Despite Less-Than-Robust Job Growth

See update below: Jack Welch claims that the latest unemployment numbers were manipulated to help President Obama’s re-election campaign.

The unemployment rate in the U.S. fell to 7.8 percent in September, the first time it has been below 8 percent since January 2009. The sharp decrease comes even as the government reported an expected, but less-than-robust 114,000 new jobs were created during the month.

However, this morning’s jobs report from the U.S. Labor Department also added 86,000 to the initial jobs counts reported for July and August.

Economists had expected the unemployment rate to rise, so the reduction came as a surprise, particularly since it was the result of more people working.

Unemployment decline due to more people working

The U.S. Bureau of Labor Statistics said 873,000 workers got jobs during September, the first significant increase in three months. Many of them took part-time work, which helped push the number of people working part-time because they can’t find full-time work up by almost 600,000 in September to 8.6 million.

However, the number of workers participating in the labor force was unchanged during the month, meaning the decline in the unemployment rate was due to more people working, rather than a smaller overall workforce.

Because different surveys are used by the Bureau of Labor Statistics to calculate employment and job growth, the two numbers, though related, don’t correlate directly in any one month.

The number of unemployed Americans declined by 456,000 to 12.1 million. A year ago it was 13.9 million. Another 2.5 million are out of work, but not officially counted as unemployed. When these numbers are considered, along with the part-timers who want full-time work, the unemployment/underemployment rate is at 14.7 percent.

Private sector employers, meanwhile, reported creating 104,000 non-farm jobs on a seasonally adjusted basis last month; state governments added 10,000, one of the few times in the last several years there was an increase in government hiring. Most of the new jobs came in education. Economists expected the private sector to add about 130,000 jobs. ADP reported Wednesday that its count of private, non-farm jobs showed a September increase of 162,000.

Job gains in the service sector

All the job gains came in the service sector, which added 114,000 jobs overall. Manufacturing, which had been adding jobs, took a big hit during the month, declining by 16,000. About a third of the loss came from cuts in computer and electronic products manufacturing. Construction added 5,000 positions.

The big gainers were health care, which added 44,500 jobs, with 29,500 of them coming from increases in doctor’s offices, outpatient care centers, and home health care. Food services and bars also added big, growing by 15,700 jobs.

Transportation and warehousing jobs increased by 17,100, as transit and group passenger services added 9,200 jobs and warehousing and storage added 4,300.

The financial sector also was hiring, increasing its overall workforce by 13,000 workers, with more than half the jobs — 8,100 — coming in the real estate.

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.

To the north, Canadian employment numbers, also released this morning, took a big jump adding 52,000 workers to the economy there. The increase was five times what economists had forecast, Bloomberg reported.

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UPDATE: Former General Electric CEO believes that someone “manipulated the sharp drop in the unemployment rate to help President Obama’s re-election campaign,” according to a report in the Los Angeles Times. The newspaper says that:

Minutes after the Bureau of Labor Statistics reported that the September unemployment rate had surprisingly plunged to 7.8% from 8.1%, Welch took to Twitter to say that the numbers were cooked to give Obama a boost following what many analysts said was a poor debate performance on Wednesday.

“Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change number,” Welch tweeted.

Former White House economic aide Austan Goolsbee responded that Welch didn’t know what he was talking about. “love ya jack but here you’ve lost your mind,” Goolsbee tweeted.”