U.S. Unemployment Drop Sharper Than Expected

The latest jobs report from the government showed a surprisingly large decline in the unemployment rate. It fell to 7.8 percent, its lowest point in three and a half years. The decline was big enough to draw skepticism about the validity of the report.

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MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

And we begin this hour with a surprise on the jobs front. The Labor Department said today that the U.S. unemployment rate fell to 7.8 percent in September. That's a much sharper drop than expected. It was good news for President Obama and his re-election hopes.

The rate hasn't been that low since the month he took office. But other parts of the report suggested that the jobs picture isn't as good as it appears, and some conservatives even accused the White House of manipulating the numbers for political gain. Here's NPR's Jim Zarroli.

JIM ZARROLI, BYLINE: After his performance in Wednesday's debate was roundly criticized, President Obama was looking for some good news. Today, he got it. The unemployment rate fell three-tenths of a percentage point to its lowest level in more than three-and-a-half years. Alan Krueger is chairman of the White House Council of Economic Advisers.

DR. ALAN KRUEGER: And I think today's report shows us further evidence that the economy is continuing to recover from the deep recession from back in 2008.

ZARROLI: The report also contained some other nuggets of good news. The length of the average work week rose a bit, and for once the drop in unemployment didn't occur because people left the workforce. In fact, the Labor Department said many more people looked for jobs in September, and many more found them.

But in other ways, today's report left a lot of people scratching their heads even though more people found work. The government also said the economy created just 114,000 jobs in September, a pretty modest improvement. Economist Nigel Gault of IHS Global Insight says several factors might explain this contradiction. Gault says the government calculates job creation by surveying companies directly, and the survey methods have flaws.

DR. NIGEL GAULT: When you're in a period of recovery, you know, there's difficulty keeping pace with the creation of new firms. So it's probably understating jobs, particularly in areas like construction where new, small firms are very important.

ZARROLI: But Gault says there are even bigger problems with the unemployment rate. It's based on a separate survey of U.S. households, one that uses a much smaller sampling base, so it's much less accurate. And Gault says the big drop in unemployment last month is probably something of a statistical outlier.

GAULT: So, overall, it's a positive report - I think not quite as positive as the headline drop in unemployment would suggest.

ZARROLI: The paradoxes in today's report illustrate why economists routinely warn not to view any single economic report in isolation. What matters is the trend, and that has shown slow, steady job growth for two-and-a-half years. Keith Hall was, until recently, the commissioner of the Bureau of Labor Statistics, which compiles the monthly employment report.

DR. KEITH HALL: We're getting mixed signals from the two surveys, and ideally I would like to wait a month or two and see which survey is correct because they almost always fall back into alignment if they fall out like this in a month or two.

ZARROLI: But those kinds of warnings tend to get drowned out in an intensely politicized atmosphere like the current one. And today's report quickly came under attack from conservative TV commentators, who suggested, without much evidence, that the Obama campaign had somehow manipulated the numbers to make the economy look better.

Former General Electric Chairman Jack Welch, a Romney supporter, even tweeted: Those Chicago guys will do anything. Keith Hall said the Bureau of Labor Statistics has a long history of independence from politics.

HALL: And there are a lot of people who are involved in collecting and compiling this data, and it would be very difficult to really manipulate the numbers. As far as I'm concerned, I think it would be very, very difficult.

ZARROLI: The Obama campaign went even further, calling the allegations ludicrous. For the campaign, one thing probably matters more than anything else. Today's report means that the official unemployment rate has now fallen below 8 percent, and President Obama can make the case to voters that the long, slow recovery is showing some results. Jim Zarroli, NPR News, New York.

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