The U.S. unemployment rate fell to 7.8 percent in September, down from 8.1 percent in July, according to government figures. That's now the lowest level since January 2009. And, for once, the rate fell because Americans are actually finding work—and not just dropping out of the labor force. That's genuinely good news for an economy that's still struggling.
There are two different numbers used by the Bureau of Labor Statistics to measure the health of the labor market. There's the payroll survey, which collects data from businesses and government. The headline number here is quite modest, suggesting that the U.S. economy added just 114,000 jobs in September.
The truly upbeat part came in the data revisions. As it turns out, those lackluster months of July and August were better than we thought. The agency now says that the U.S. economy added 181,000 jobs in July, rather than 141,000. And it says that the economy added 142,000 jobs in August, rather than a mere 96,000. To be clear, this is still a middling recovery. At this pace, it will take more than a decade to return to full employment. But at least the economy wasn't slowing down dramatically over the summer, as originally reported.
BLS also publishes the household survey, which asks individuals about their work situation. This is used to calculate the official unemployment rate. And the household numbers were exceptionally strong this month, showing 873,000 more employed Americans in September than in July. That's a massive boost, and explains why the unemployment rate plunged to 7.8 percent.
The employment-to-population ratio also increased by 0.4 percentage points to 58.7 percent. That, too, is an encouraging sign. In the past, the unemployment rate had fallen mainly because more Americans were giving up on searching for work and dropping out of the labor force. Not this time. The modest improvement appears to be real.
So what explains this surge in employment? It's possible that the jump in this month's household survey was merely a fluke—the household survey is generally noisier and more volatile than the payroll data. Another possibility is that the increase was driven by a rise in part-time workers, as there are 582,000 more people working part-time this month than last.
But before anyone gets ecstatic at the jobs situation, let's add a few sobering notes of caution. There are still 12.1 million unemployed people in the United States and an additional 2.5 million people who would like jobs but are too discouraged to look. Within that group, there are still 4.8 million people who have been jobless for at least 27 weeks. The labor market is still very, very far from healthy.
And, of course, the biggest caveat of all is that these jobs numbers could well be wrong. The monthly payroll numbers tend to get revised in subsequent months as BLS collects fuller data. The July and August jobs reports just got revamped upward by a combined 86,000 jobs. And, in its annual benchmark revision, BLS found that it had essentially been under-counting the number of new jobs by about 30,000 per month between April 2011 and May 2012. This isn't a conspiracy on the part of government statisticians, as former GE CEO Jack Welch suggested today. Getting the numbers right is inherently difficult.
So this month's jobs report is encouraging, but we should all be wary of reading too much into any one month's report.
— The economy added 386,000 more jobs last year than we thought.