Jobless rate drops to 7.8 percent; economy adds 114,000 jobs

The unemployment rate dipped below 8 percent in September, to 7.8 percent, shaking up estimations of the presidential race and providing welcome news for President Obama just a month before Election Day. 

The economy added only 114,00 jobs, yet the unemployment rate still dropped from 8.1 percent to 7.8. 

Total employment rose by 873,000 in September, a significant jump that explains the drop in the unemployment rate. 

The report revised figures up in July and August, and it showed more people entered the workforce last month. This is also the first report to be released since the Bureau of Labor Statistics announced it had undercounted employment for the previous year by 386,000.

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September's is the penultimate report before the presidential election, and the unemployment rate is now lower than when Obama entered office. No incumbent president has won reelection with an unemployment rate above 8 percent since President Franklin Roosevelt. 

The report is particularly welcome news for the White House and Obama's campaign after a difficult week in which Obama was roundly thought to have been beaten in his first debate with Republican presidential nominee Mitt Romney.

Romney hit Obama hard during the debate on his handling of the economy, which has been the central issue of the race. 

“This is not what a real recovery looks like," Romney said Friday in reaction to the report. 

"We created fewer jobs in September than in August, and fewer jobs in August than in July, and we’ve lost over 600,000 manufacturing jobs since President Obama took office. If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11 percent," he said. 

The report from the Bureau of Labor Statistics revised figures for July and August to show stronger growth.

In July, the economy added 181,000 jobs and in August it added 142,000, according to the report. Originally Labor had estimated the economy added 141,000 in July and 96,000 in August. 

And for the first time in months, the job market showed stronger growth as 418,000 more people entered the workforce to look for a job.

"This is a really big report. This is a big report," said Mark Zandi, chief economist for Moody's Analytics. He noted average weekly hours worked were also higher, according to the report.

At the same time, Zandi noted the monthly reports are volatile and that half of the 873,000-person gain in total employment came from part-time workers. He suggested some of those gains could also be related to seasonal adjustment issues that could fall out of the data.

The number of unemployed fell to 12.1 million, the lowest level since January 2009, which is also the last time the jobless rate was 7.8 percent. The Dow Jones Industrial average was up 60 points in early trading.

Some commentators questioned Friday how the report could show the unemployment rate falling in September amid such strong growth in labor participation. 

Former GE CEO Jack Welch accused the administration of cooking the books, saying in a message on Twitter: "Unbelievable jobs number ... these Chicago guys will do anything ... can't debate so change numbers."

Heidi Shierholz, an economist at the Economic Policy Institute who closely follows the labor market, said this month's employment story is one of different reports. The jobless rate is based on a survey of households, and showed people were getting jobs and not leaving the labor force. 

The establishment survey of businesses that determined the job count showed the kind of growth that is basically just enough to keep up with population growth, Shierholz said in a statement. 

"The rule of thumb when the two surveys tell different stories is to go with what the establishment survey says. However, the household survey provides reasons to be somewhat more optimistic about job opportunities for American workers," Shierholz said.

This story was posted at 8:30 a.m. and updated at 10:28 a.m.