Will jobs report give a timely lift to Obama's record on the economy?
At 7.8 percent, the US unemployment rate is now back to the point it was when President Obama took office. But Mitt Romney say it's still not a recovery – and that the real jobless rate is closer to 11 percent.
In a surprise development, the unemployment rate, at 7.8 percent, now stands the same level as when President Obama took office in January 2009.Skip to next paragraph
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On Friday, the Department of Labor reported the widely watched rate fell from 8.1 percent to 7.8 percent in September.
At the same time, businesses last month added only 114,000 new positions, giving Republican challenger Mitt Romney ample opportunity to criticize the president’s handling of the economy.
After this month, there is only one more jobs report before the election, so this report takes on distinct political importance. For Mr. Obama, the drop in the unemployment rate might be considered his best news for some time, especially considering that his Wednesday debate performance was considered to be flat, at best, by many commentators. In response, Mr. Romney charged that Friday's jobs report still doesn't signal that a real recovery is under way.
“These are the numbers the politicians are going to have to live with,” says economist Joel Naroff of Naroff Economic Advisors in Holland, Pa. “Romney can say 114,000 jobs is not enough, and Obama can say we are back to where the economy was when he took over and he has essentially turned it around.”
“It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December of 2007," said Alan Krueger, chairman of the Council of Economic Advisers, in a statement.
But Romney said the downward trend in job creation for the past three months is distressing. “This is not what a real recovery looks like,” he said in a statement. “If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11 percent.”
The divergence between the unemployment rate falling and new jobs created is the result of two different surveys. The new jobs part is called the establishment survey, which is derived from questioning businesses about their hiring. The unemployment rate is derived from what is called the household survey, which involves calls to about 50,000 people to ask their job status.
From the household survey, the Bureau of Labor Statistics found that 873,000 people said they had found work. After estimating the number of people who got fired or laid off, the BLS, using that survey, found that the number of unemployed people had dropped by 456,000.
The household survey sometimes picks up small-business hiring that is not captured in the establishment survey. But Mr. Naroff cautions that this particular statistic is volatile. “This is not a normal jump. It might overestimate what might have been done in any given month,” he says. “It is the pattern that is more important.”
The pattern over the past three months shows job creation is eroding. In July, the economy created 181,000 jobs and in August it created 142,000. Then, in September it dropped to 114,000 jobs.
Naroff says the reason for the dropoff is that businesses are beginning to pull back in advance of the uncertainty over the budget standoff in Washington. “We know people are still buying motor vehicles and going to department stores,” he says. “But business does not want to hire until Washington gets fixed.”