Surprise Decline in Unemployment Gives Obama a Boost
The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The jobless rate dropped from 8.1 percent to the lowest level since Obama took office in January 2009, and hourly earnings climbed more than forecast.
“We’re seeing some firming in the labor market,” said Dean Maki, New York-based chief U.S. economist at Barclays Plc. “It’s still not booming or extraordinarily robust, but it is a labor market that we expect to continue to be firm enough to push the unemployment rate lower.”
Today’s report, the penultimate before the election, gives Obama a chance to point to an improving economy after he stumbled in this week’s debate against Republican challenger Mitt Romney. Better job prospects will give workers the wherewithal to boost spending, helping cushion the economy from a global slowdown.
Stocks reversed early gains as Spanish Prime Minister Mariano Rajoy damped speculation the nation was nearing a decision to seek a bailout to secure its finances. The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,460.93 at the close of trading in New York after rising as much as 0.7 percent. The yield on the benchmark 10-year Treasury note climbed to 1.74 percent from 1.67 percent late yesterday.
On the Mend
Obama used today’s report to press home his message that the economy is on the mend after the worst recession since the Great Depression.
“We’ve made too much progress to return to the policies that led to the crisis in the first place,” Obama said at a campaign rally in Fairfax, Virginia, a suburb of Washington.
Unemployment had been higher than 8 percent since February 2009, the longest stretch since monthly jobless figures were first compiled in 1948. The 7.8 percent matches the January 2009 figure.
The decline in the unemployment rate is “good news for Obama,” said Alan Abramowitz, a political scientist at Emory University in Atlanta. The drop below 8 percent is “symbolically important” to voters, he said.
Only one president, Ronald Reagan, has been re-elected since World War II with unemployment above 6 percent. On Election Day 1984, the rate was at 7.2 percent, having fallen almost three percentage points in the previous 18 months.
Romney focused on the slowing pace of hiring.
“This is not what a real recovery looks like,” the former Massachusetts governor said in a statement. “We created fewer jobs in September than in August, and fewer jobs in August than in July.”
Jack Welch, the former General Electric Co. chief executive officer, accused the Obama administration of manipulating the employment data for political gain.
“Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers,” Welch said in a Twitter message posted immediately after the report.
Alan Krueger, chairman of the White House Council of Economic Advisers, told Bloomberg Television that Welch’s remark was “irresponsible.”
In Canada, which sends about three-quarters of its exports to the U.S., employment last month rose more than five times faster than economists projected on gains in full-time positions from retailing to construction.
The $18.12 billion increase was the biggest in three months and followed a revised $2.5 billion decrease in July. The median forecast of 34 economists surveyed by Bloomberg called for a $7.25 billion increase. The pickup in non-revolving borrowing, which includes student and automobile loans, was accompanied by the first gain in revolving credit in three months.
Payrolls were forecast to increase by 115,000, according to the median estimate in a Bloomberg survey of 92 economists. Revisions to July and August added a total of 86,000 jobs to payrolls in those months.
The unemployment rate, derived from a separate survey of households, was forecast to rise to 8.2 percent, according to the survey median. Estimates ranged from 8 percent to 8.3 percent.
The labor market has finally become brighter for Jennifer Arnold. The 39-year-old started her job as an assistant grant writer at United Way in Columbus, Ohio, this month after being unemployed for a year and a half. She relied on networking and career counseling to help secure the new position.
“It wasn’t easy,” said Arnold, who has a master’s degree in public administration. “Sometimes I just couldn’t even do it because it was just too much.”
The household survey showed an 873,000 increase in employment, the biggest since June 1983, excluding the annual Census population adjustments. Some 582,000 Americans said they were working part-time because of slack business conditions or because they were the only jobs they could find.
Some full time jobs are being turned into part-time positions.
Jonathan Bethly, 26, of Dunwoody, Georgia, says his hours as a cook at a restaurant and sports bar have been cut in half from 40 hours a week. He recently started to look for a late- night or overnight shift to supplement his pay.
“My hours gradually started coming down, and they have really come down,” he said. “I need to find another job. I am in desperate need for a couple checks.”
Because of the increase in part-time employment, the so- called underemployment rate -- which includes those part-timers who’d prefer a full-time position and people who want work but have given up looking -- held at 14.7 percent.
Private payrolls, which exclude government agencies, rose by a less-than-forecast 104,000 in September. They were projected to advance by 130,000, the survey showed.
Factories eliminated 16,000 positions, compared with the survey forecast of no change and following a 22,000 decrease in the previous month. September and August marked the worst two months for manufacturing employment since December 2009-January 2010.
Employment at private service-providers increased 114,000. Construction companies added 5,000 workers, and retailers hired 9,400 more employees.
Government payrolls increased by 10,000 after a 45,000 jump the month before. The revised August gain reflected a surge in the hiring of teachers. Companies may hold back on hiring plans amid concern over Europe’s weakening economy and the so-called fiscal cliff, a combination of more than $600 billion of tax increases and government spending cuts that will take effect next year if Congress doesn’t act.
The share of U.S. chief executive officers planning to add employees or invest more in the next six months declined last quarter, and a bigger share said they’d cut jobs and spending, according to a Business Roundtable survey last month. The group’s economic-outlook index slumped to the lowest since 2009.
“Over the past several months, we’ve seen the economy lose some of the momentum it had generated coming into the year,” Carl Camden, president and chief executive officer at temporary- staff provider Kelly Services Inc. (KELYA), said during a Sept. 13 conference. About a year ago, “we were seeing good signs of a fairly solid recovery. But all of that is definitely slowed and you see that in staffing volumes around the world.”
Signaling that it can’t combat a slowdown in growth caused by stricter fiscal policy, the Fed last month said it would hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The central bank also began a third round of stimulus, buying $40 billion in mortgage bonds a month. The S&P 500 rose the next day to its highest close since December 2007.
“We’re looking for ongoing, sustained improvement in the labor market,” Fed Chairman Ben S. Bernanke told reporters following the announcement on Sept. 13. “What we’ve seen in the last six months isn’t it.”
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