Job growth, unemployment rate rose in October as workers re-entered labor force

November 2, 2012

The U.S. jobs market in October sustained its slow trudge toward better times, the government reported on Friday, in the last major report card on the economy before the presidential election.

The nation has been adding a healthy average of 170,000 jobs a month recently, and even though hundreds of thousands of people decided to join the labor force,
the unemployment rate in October remained “essentially unchanged” at 7.9 percent, the Labor Department reported.

While the outlook for American workers may be improving, it is doing so very slowly compared with how fast the catastrophic recession cost jobs, according to economists on both sides of the partisan gap.

“If you look at this out of context, it’s a solid report,” said Heidi Shierholz, a labor economist at the left-leaning Economic Policy Institute. “If you’re looking in the context of the recession, it’s not what we need to dig us out of this huge hole.”

She estimated that the United States needs to create 9 million jobs to fill in the shortfall created by the downturn, and that, at this rate, the nation would not return to pre-recession unemployment rates until 2020.

The improvement in jobs amounts to “a good solid single — in a game where we are 23 million runs behind,” said Douglas Holtz-Eakin, president of theAmerican Action Forum, a center-right think tank, and director of the Congressional Budget Office under President George W. Bush. “Any celebration about this would be a triumph of low expectations.”

No president since Franklin Roosevelt has faced reelection with the unemployment rate as high as it is today, a fact that some have said bodes well for President Obama’s GOP challenger, Mitt Romney.

But if there is a connection between the unemployment rate and the election outcome, recent history suggests it may have more to do with momentum in the jobs market than the rate itself.

Three times since 1980, an incumbent president faced voters when the unemployment rate was over 7 percent.

In the 1980 and 1992 elections, the incumbents, Jimmy Carter and George H.W. Bush, lost. The unemployment rate had been rising or relatively flat across the 10 months preceding those elections.

In 1984, Ronald Reagan won. In that year, the unemployment rate had been sinking before the election, part of a steady two-year drop from a peak of 10.8 percent.

Not surprisingly, given the potential importance of momentum, Obama sought to depict the jobs figures as evidence that the economy was moving in the right direction — while Romney tried to portray the reverse.


“We’ve made real progress,” Obama told a crowd in Hillard, Ohio, referring to the fact that the economy has added 5.4 million private-sector jobs over the past 32 months.

The jobs report released Friday marked the third anniversary of the recession’s peak unemployment, when it hit 10 percent. It has drifted downward since then.

The unemployment rate in October did rise to 7.9 percent, up from 7.8 percent, but the reason behind the uptick suggested an improved job market: More Americans decided to look for work, though not all of them found jobs.

“I don’t think anyone is going to look back after the election and say it was the October employment report that came out before the election that mattered,” said Paul Ashworth, chief U.S. economist for Capital Economics. “It hasn’t been steady as she goes, but the unemployment rate has been on a downward trend for a while.”

But Republicans have argued that Obama has not done enough to improve the economy during his tenure. The number of people employed is virtually the same as when he took office in January 2009.

This is “a reminder that the economy is at a virtual standstill,” Romney said on Friday.

“The jobless rate is higher than it was when President Obama took office,” Romney said in a statement, “and there are still 23 million Americans struggling for work.”

Indeed, as Friday’s report showed, the rate of job creation is still well below what it was at the start of 2012, and Friday’s jobs report showed that average weekly earnings dropped slightly.

Other recent economic reports, moreover, have suggested that businesses are pulling back and cutting capital spending, perhaps concerned about the slowing global economy and the approaching fiscal cliff, a series of tax hikes and cuts in government spending that are set to take effect in January.

But the new jobs numbers also suggest that whatever their fears, firms are hiring at a stronger pace than they have for the past several months.

In fact, private employment rose by even more than the overall job growth, up 184,000, as cuts by the U.S. Postal Service and state governments acted as a drag.

Among the strongest sectors for job creation were retailing, which added 36,000 jobs; health care, which added 30,500 jobs; and leisure and hospitality, which added 28,000 positions. The construction industry reported a gain of 17,000 jobs, a welcome improvement that reflects a rebound in the housing industry.

“The problem is that every time you see some momentum in the economy, it tails off — it’s happened three times already,” said Harry Holzer, professor of public policy at Georgetown University and co-author of “Where Are All the Good Jobs Going?” “But with some of these other signs — more construction, lower household debt — it does seem like the economy is really turning up this time.”

David Nakamura contributed to this report from Ohio.

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