Job growth is signaling its desire to burst higher, as the unemployment rate made a surprise decline to below the eight-percent threshold to 7.8% in September. About 114,000 workers managed to find full-time work, which, while slightly below the market estimate of 120,000 jobs, was not the surprise; the surprise was that the Labor Department made a significant upward revision for August to 142,000 jobs from the 96,000 jobs first reported. (Source: “Economic Calendar,” Yahoo! Finance.)
And while I’m pleasantly surprised with the drop in the unemployment rate, I only see this report as a start, as there is plenty of work ahead for President Obama or Mitt Romney. (Read “Why I Think Job Creation’s a Myth.”)
Let’s take a closer look at the unemployment rate, based on data from the Bureau of Labor Statistics. The recent reading was the lowest since a 7.3% unemployment rate in December 2008, but the number remains well below the four-percent level we saw during 2006 and 2007.
The unemployment rate has improved from the recession high of 10.0% in October 2009, which was the highest level since the 10.8% during the December 1982 recession.
The trend of the unemployment rate shown on the graph shows improvement since August 2011, when over nine percent of Americans were officially unemployed.
It took close to five years for the unemployment rate to fall below six percent in 1987 from the 10.8% in 1982. A breach below five percent was made in 1997.
Chart copyright Lombardi Publishing, 2012;
data source: Bureau of Labor Statistics
While the September unemployment rate reading is encouraging, it’s still well below the record unemployment rate of 3.8% in April 2000, which was largely driven by the boom in technology hiring during the Internet explosion and subsequent bubble.
The problem that I continue to see is that the number of officially unemployed stood at a stubborn 12.1 million in September; albeit, it’s down from the recession high of 15.4 million in October 2009, but well above the pre-recession low of 6.7 million in March 2007. That’s still 8.7 million jobs that need to be recovered, but then there’s the unofficial 22.5 million unemployed, which is another story that needs to be addressed. (Source: www.USDebtClock.org.)
Moreover, there’s still a question of quality versus quantity. The quality of the jobs being created continues to be a sore spot with me. For example, roughly 30.0% of the jobs generated in August were driven by the food services sector, according to data from the Labor Department. While every job is important, these so-called “McJobs” are low-paying and, in my view, do little to drive the economy. What we need is to see is the creation of higher-wage jobs that will really add a boost to consumer spending and GDP growth.