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7.8% unemployment rate is lowest since 2009

Mitchell Hartman Oct 5, 2012

A surprising drop in unemployment in September — down three-tenths of a percentage point to 7.8 percent — might put a bit of wind back behind President Obama’s candidacy two days after a debate performance that was panned by critics. The jobs report will at least allow him to change the conversation from arguments about taxes and deficits. The unemployment rate is now the same as when he started his presidency in January 2009.

But how do you jibe a weak jobs report with a dropping unemployment rate? The issue here is that the monthly jobs report is telling two different stories on job creation — based on the two very different surveys the Bureau of Labor Statistics conducts every month. The ‘establishment survey’ asks a sample of employers if they added or subtracted jobs. It’s a large survey and statistically more reliable. It found 114,000 more jobs in September than August — a very middling increase. However, job-creation in July and August was revised upward, significantly: 86,000 more jobs were added in those months than earlier reported.

The ‘household survey’ simply asks people if they’re working, or looking for work. It’s a smaller sample than the establishment survey, and more volatile month-to-month. That’s where we get all the good news this month: 7.8 percent unemployment. And it’s the result of more people actually working, as opposed to people dropping out of the labor force and just giving up looking, as in previous months.

Generally, economists’ rule of thumb is to trust the better data-set, which means we’re probably still stuck in the slower job-creation numbers we see in the establishment survey. However, as labor economist Heidi Shierholz at the Economic Policy Institute told me, “the very positive nature of the household survey is an optimistic backdrop.” It may mean there’s more room to the upside for job-creation, and job-seekers, in coming months.

It also may mean that people who have long given up looking, come out of the woodwork and finally start job-hunting again.

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