US unemployment rate hits Obama-era low

Obama tells supporters the country has come too far to turn back

The US unemployment rate fell last month to its lowest rate since January 2009, figures from the Department of Labor have shown, surprising analysts who had been expecting a small rise.

Last month's rate came in at 7.8%, down from 8.1% in August.

The latest numbers also showed that the US economy added a further 114,000 jobs in September, beating expectations.

The presidential candidates sparred over the data, which is seen as a key issue for November's elections.

Speaking at a campaign event in the state of Virginia, President Barack Obama said: "Today, I believe that as a nation we are moving forward again."

Falling unemployment means "this country has come too far to turn back now", he added.

Start Quote

Unbelievable jobs numbers... these Chicago guys will do anything... can't debate so change numbers”

End Quote Jack Welch Former CEO, General Electric

But Republican presidential nominee Mitt Romney said that an unemployment rate of 7.8% "is not what a real recovery looks like".

When joblessness was last this low, President Barack Obama was about to take office.

The figures are a boost for Mr Obama whose performance was widely panned in a presidential debate with Mr Romney in Denver on Wednesday.

'Mixed picture'

Economist Sean Incremona of New York-based company 4Cast said the latest data showed that the US economy remained subdued.

"Generally, we are still seeing a mixed underlying picture that is neither too impressive nor terrible," he said.

Fellow economist, Omer Esiner, of Rhode Island-based Commonwealth Foreign Exchange, was more upbeat.

Mitt Romney says the unemployment figure does not reflect economic reality

"The headline of the day is clearly the drop in the unemployment rate, which was a big surprise," he said.

"There is something in these numbers for everyone. The rise in the participation rate shows somewhat of a real improvement in the labour market."

Jack Welch, the former CEO of General Electric, caused a stir when he appeared to suggest the figures had been massaged.

He tweeted: "Unbelievable jobs numbers... these Chicago guys will do anything... can't debate so change numbers", in a reference to the Obama campaign, which is based in the Illinois city.

His message was picked up by Republicans and conservative commentators, prompting a swift reaction from Democrats.

Start Quote

This is undoubtedly good news for President Obama's re-election campaign at the end of a week when he made a hash of the first debate”

End Quote

Austan Goolsbee, an Obama economic adviser, responded directly to Mr Welch, tweeting, "Love ya Jack but here you've lost your mind".

Housing rebound?

US Labor Secretary Hilda Solis said it was "ludicrous" to think the statistics could have been manipulated.

Speaking to CNBC News, she said: "I'm insulted when I hear that because we have a very professional civil service."

The latest official data showed that the construction sector added 5,000 jobs last month, while the number of people working in government jobs rose by 10,000.

However, the biggest gain was record in the healthcare sector, which added 44,000 jobs in September.

As well as more people finding jobs, the report showed more people were looking for employment. This contrasts with recent surveys, which showed jobless Americans giving up on the search for work.

The Labor Department also used the release of the September data to revise up how many new jobs were created in both July and August. It said that 86,000 more jobs than first calculated were added across the two months.

Analysis

Today's figures are a sign that the economy is heading - albeit slowly - in the right direction and echoes other indicators that point to a slow and steady recovery. The fall to 7.8% takes President Obama back to the same jobless rate he inherited when he took office - and that is psychologically important.

But economists say there is little chance prospects will dramatically improve in the short term. The 'fiscal cliff' - a package of tax rises and spending cuts - is edging closer and that threatens to derail growth. The ongoing dispute over raising the country's debt ceiling also adds to the uncertainty. That means businesses are wary of investing or expanding and they are putting off hiring too.

For that to change, Americans need to feel better about the economy and more willing to spend. Until then, new jobs will be hard to come by.

Separate official figures released at the end of last month revised down how much the US economy had grown between April and June.

Recent housing data has also shown some encouraging signs of recovery, analysts say.

Sales of existing homes, and housing construction have picked up and the main home-price index has risen consecutively for three months.

Housing prices have rebounded in some areas, while mortgage rates are expected to stay at record lows.

The Federal Reserve last month said it would buy $40bn (£25bn) of mortgage-backed debt per month until the economic outlook improves.

Gross domestic product in the second quarter grew at an annualised rate of 1.3%, down from the previous estimate of 1.7%.

Analyst Ron Florance, managing director of Wells Fargo Private Bank, said that the latest data continued the "trajectory" of a weak US jobs market.

"We continue to increase jobs but not at a rate that is fast enough to significantly change the unemployment picture for American workers," he said.

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